New NAR Settlement Brings Changes to Real Estate Commission Agreements and Home Showing Processes

As part of a recent settlement, the National Association of Realtors (NAR) has changed how real estate brokers in the United States handle showing homes to their clients. In October of 2023, a verdict was finally reached in the case Burnett v. National Association of REALTORS® (NAR) nearly four years after the class action case was filed in Missouri federal court. The case
was brought forth by a group of home sellers against NAR, Anywhere, Berkshire Hathaway HomeServices, Keller Williams, and RE/MAX that claimed real estate commission rates are too high, buyers’ representatives are paid too much, and industry guidelines lead to inflated commission rates. To be entered into the lawsuit, the homebuyer had to state that they did not understand the sale process or know that they could negotiate the commission. Because the NAR and the other defendants lost, they were required to pay millions of dollars as part of the settlement. Real estate agents themselves do not have to pay back any prior commissions.

Additionally, effective August 17, 2024, real estate brokers are required to have clients sign a buyers’ agent agreement (also called buyer agency agreement, buyer-broker agreement, or a buyer representation agreement) before showing any houses. The contract can be for as little as one home to as long as six months (in 30 day increments) and can be renewed as often as needed if you are happy with your agent’s performance. It is important to read the contract thoroughly and ask any questions before signing.

When the agent is formally selected, another contract will be signed before any other homes are shown that includes the agent’s responsibilities and how much they will be paid. While many states already required these contracts, they are now required in all states. At this time, the buyer decides what percent of the sale they want their agent and the selling agent is paid and can request the seller to pay your agent’s commission. The listing agreement no longer determines the Buyers Representation compensation. That fee is now negotiable upfront between The Client and their Brokerage and Agent. The process is spelled out in Addendum X (Cooperating Compensation Addendum) of the final contract.

The real estate agent is also required to disclose to all parties if they are working for both the buyer and the seller.

The new process is expected to have little influence on the buyer’s experience, home prices, or how real estate agencies or brokerages are operated. The buyer will still pay their agent even if the seller refuses to pay. Buyers looking to tour virtually will also be required to sign the contract before the tour takes place.

The NAR believes cooperative compensation benefits the buyer and the seller, with the better negotiator getting the best deal. They plan to appeal the decision. REALTORS play an important role in the home buying process and home buyers and seller should still entrust the transaction with a licensed real estate agent to ensure everyone is represented and the home changes ownership smoothly.