Unless you’ve been living under a rock, you’ve likely heard this question from Buyers and Sellers more frequently: “What does the NAR settlement mean for me?” While none of us have a crystal ball, I can share how I’ve been handling these conversations with my clients.
For my Buyers, I explain what my brokerage charges and that historically, the Seller has primarily paid this fee, which is included in the home’s sales price. If the Seller offers to pay less than what my brokerage charges, my Buyers are responsible for the difference. I also mentioned that if the Seller offers a lower amount, I might be able to get permission from my broker to reduce my fee. With the NAR settlement, this doesn’t change. What may change is the Sellers’ willingness to pay the Buyer’s Broker’s commission, making it a more significant part of our discussion.
For my Sellers, the conversation is similar. I explain the Buyer’s perspective and the challenges they face. By choosing not to offer a Buyer’s agent compensation or significantly lowering it, the Seller potentially reduces the number of Buyers considering their home since the Buyer would need to bring more cash to the table. This scenario is already happening, with some Sellers lowering or eliminating Buyer agent commissions. We’ve seen Buyers choose one home over another because the Seller wasn’t offering to pay their agent a commission. Will this shift the industry long-term? That’s where the crystal ball comes in.
Are there going to be agents willing to work for less? Probably. Will those agents offer the same level of service a traditional Buyer’s agent has offered? Probably not, and here’s why: Let’s assume a Buyer’s agent is willing to make less money per transaction. The question is, are they willing to make less money annually? If not, they’ll need to do twice or three times as many transactions as usual. Anyone who works with Buyers knows how time-consuming it is to get to the closing table. If an agent has to double or triple their workload to make the same money, they won’t be able to offer the same level of service–that’s just a fact. Conversely, you’re going to see newer agents who are willing to make less money each year, and you’ll see experienced agents leave the industry to pursue other things. Any experienced agent knows that this is bad news for Clients.
I think we may see the most significant impact in luxury home sales. It’s somewhat easier to justify paying both a Buyer and Listing agent for homes under $1M, where it’s understood that the Buyer can’t bring that kind of cash to the table and needs it wrapped into their mortgage. But in luxury home sales, will those agents be able to demonstrate their value in the same way? That is the elephant in the room, my friends.
Deborah Vahle is a Partner on the CityLiving Group mega team at Parks and has been involved with the STR world since 2016. She is a mom of 5 and is currently being educated by her children on all of the Taylor Swift albums and easter eggs.
