The biggest challenges with NAR’s proposed settlement: Pulse

Join the movement at Inman Connect Las Vegas, July 30 – Aug. 1! Seize the moment to take charge of the next era in real estate. Through immersive experiences, innovative formats and an unparalleled lineup of speakers, this gathering becomes more than a conference — it becomes a collaborative force shaping the future of our industry. Secure your tickets now!

Pulse is a recurring column where we ask for readers’ takes on varying topics in a weekly survey and report back with our findings.

Love it or hate it, NAR’s $418 million settlement is on its way to becoming a reality. What that means for you, and the way you do business, isn’t yet clear, and probably won’t be until the terms of the settlement have been approved by the courts.

via GIPHY

So, purely based on what we know now, we asked you to fill us in on what you see as the biggest challenges with NAR’s proposed settlement changes. Here are what you see as the industry’s biggest hurdles, in your words:

Public perception

• Their failure to control the story and the misinformation being spread everywhere.

• Educating the public.

• Consistent clear communication with the public.

• Public perception of Realtors.

• Understanding where the industry is going to settle and whether this lawsuit drama will be just noise six months from now from a consumer’s point of view.

• Locally, it will be reeducating the public on how the real estate industry transformation will affect them. At the national level it will be educating the press to present honest and informed news and opinions to the public.

• The settlement reaffirms the sentiment of some members of the public who just feel like real estate agents make too much money anyway and, therefore, should have their pay reduced. The association truly did agents a disservice by not making it clear in media responses and interviews regarding how the 6 percent commission actually worked in practice.

• How it will affect Realtor’s reputations — the media has painted us out to be rolling in the dough because of high commissions, and that couldn’t be further from the truth.

• Confusion and uncertainty in the market.

• Educating all Realtors so there is consistency in conversations and actions with the public.

Buyer

• Buyers are generally NOT going to want to sign a buyer’s agency agreement to see a house. It takes time for agents and buyers to build trust to take the relationship to the next level.

• Limits on buyer concessions and max points and fees for loan.

• Buyer-broker agreements.

• Buyers unable to pay the commission above the price of the property This has the potential to cause problems interfering with a buyer getting a property they want to buy, problems with agents, problems with representation, problems with appraisals and some loans, none of which is an improvement to our industry. Everything I pay for now is double and triple what it was, except commissions which have dwindled down over the years. Much more, and it will be hard to find a full-time professional agent.

• Buyers don’t have the funds to pay their broker.

• Obtaining a signature on a buyer rep agreement when it’s either holding an open house or showing a buyer the first property and attempting to establish trust. It’s very different than a simple agency disclosure.

• Getting buyers to agree to sign a BBA before you show them a property. Buyers will likely just go straight to the listing agent.

• Buyers priced out of the market by sellers who won’t pay the buyer’s agent/brokerage.

• The consumer will not agree to 3 percent buyer agent representation.

• If the buyers need to pay the commission no matter how much it is, it reduces how much they have available for a down payment on their mortgage. This will particularly effect first-time home buyers that typically have little cash. If the DOJ believes that these changes help buyers, they are sorely mistaken.

• Ensuring that homebuyers who are cash strapped get the representation they need and I don’t mean via limited agency with a listing agent.

• The consumer may lose in the agreement with costly mistakes in trying to represent themselves.

• Buyers can’t or won’t pay an agent. Buyers and buyers agents are finished. Listing agents will now work twice as hard for half the income while working with the seller and the unrepressed buyer. I’m expecting very negative consequences for the economy.

• Impact on buyers’ cost of housing and what that will do to market.

• On the buyer side, not getting paid and/or commissions slashed. Even with a signed agreement in place and working with buyers with the best of intensions to pay. What if they fall in love with a home and the listing/sellers are dead set in not paying any sort of commission or allowing it as part of the transaction? Part of our code of ethics is so not steer our clients. I would never do that anyway, especially if my clients LOVED the home. Bottom line, there is always a certain level of risk even if you take precautions that the buyer agent can simply be left hanging without any sort of payment. Then it turns into a domino effect, the buyers have zero representation. If buyers can’t afford to pay the agent, then everyone loses. It’s a real mess.

Transparency/discrimination

• Discriminating against VA buyers as their lending rules now stand.

• It went backward for some states, like Texas, where our MLS had full disclosure of compensation. Now, there is none, putting our profession at risk.

• Rather than the sought transparency, I think the biggest challenge will be the lack of transparency as listing agents work with sellers to offer concessions, to pay buyer agents behind the scenes rather than posted on the MLS. Buyers who are saving for their down payment now have to worry about the additional cost of paying an agent and may get locked out. Going without representation, to save money, could cost them even more with legal exposure. It’s the unintended consequences for the public. Agents will figure it out. Will the public?

• Losing MLS transparency. Finding a competitive commission model that does not violate Fair Housing.

• More dual agency, which will lead to buyers and sellers both being poorly represented.

• Representing VA buyers. They are prohibited from paying a commission. If the seller won’t pay it, then VA buyers will be left unrepresented. This will severely harm their buying power and leave them vulnerable to predatory listing agents.

• Listing agents will get both sides of the transaction very frequently! No more clear cooperation.

• Forced “dual agency.”

• The biggest challenge is discrimination. A seller may offer buyer compensation to one agent but none to someone else. Stating commission on the MLS made it clear and fair to everyone what the compensation would be. There will be no way of knowing if everyone is being treated fairly.

• Making sure agents understand that these lawsuits are ALL ABOUT STEERING.

• The lack of clarity on the need to have a buyer sign an agreement before showing them any houses? How is this enforceable? And we will likely have buyers having signed multiple forms that they don’t understand.

• The destroying of transparency.

Mixed bag

• In no particular order: 1. How to answer the misconceptions with the public? 2. Do we in real estate fully understand what is going on? 3. How is it transparent to anyone NOT to disclose what the seller is offering a buyer for closing costs (so that the Buyer can pay for our fees)? 4. How is this not an infringement with Fair Housing when it’s going to hit the Veterans and Lower Income Buyers the hardest? 5. Will the lending industry be able to change/adapt timely for the changes coming?

• For me, the biggest challenge is the unknown. How will buyer agent commissions offered by sellers be communicated to buyer agents? Will lending rules change and potentially allow buyers to finance the commission with their mortgage? Will the VA change its rule that prohibits veterans from paying a commission? If not, who will be looking out for the veterans’ best interests? How will first-time homebuyers come up with the money to pay a commission? These changes hit hardest on the consumers who can least afford it.

• Lots of loopholes! 1. The seller concession field, while slightly different, can end up being used as a compensation field and still cause steering. 2. The fact that offers of compensation can be made on a brokerage’s own listings on their own website is going to cause the big brokerages to rework their sites, and those sites will be favored over the MLS. Plus, written agreements are only required for the MLS. 3. Unless state laws change to reflect these rules, there will be more friction using the MLS than not. Plus, how will MLSs enforce some of these rules (such as written agreements)?

• As a listing agent, how many compensation phone calls will I be fielding? (Or what’s the acceptable workaround?) For our agents (we own a brokerage), helping them to stay positive and focused. There’s too much fear-mongering. Helping them pivot and not get distracted/bogged down by the “noise level” of the ruling.

• The biggest challenge is seeing an end in sight. Today is buyer’s agent commission compensation, tomorrow will be listing commission compensation. Will customary 2-3 percent listing commission now be considered anti-trust. Sure, commission is negotiable, but will the consumer see it that way? When will the lawsuits stop if everyone keeps settling?

• 1. Confusion with implementation. 2. Legislative pushback due to impact on disadvantaged buyers.

• Having all Realtors learn and follow the rules.

What did we miss? Please share your thoughts in the comments section below.

Editor’s note: These responses were given anonymously and, therefore, are not attributed to anyone specifically. Responses were also edited for grammar and clarity. Inman doesn’t endorse any specific method and regulations may vary from state to state.