Understanding the New NAR Commission Law: What It Means for Buyers and Sellers
As we navigate through 2024, a significant change has come into play in the real estate world, specifically concerning commission structures. At the Manoogian Group, we're here to help you understand what this new NAR (National Association of Realtors) commission law means for you, whether you're buying or selling a home.
What is the New NAR Commission Law?
The new NAR commission law changes how real estate commissions are disclosed and negotiated during real estate transactions. Previously, the seller typically paid the commission for both their own agent and the buyer's agent. Now, there's a shift towards greater transparency and negotiation, impacting how commissions are handled.
Key Points of the New Law
Transparency:
Upfront Disclosure: Agents must disclose their commission rates at the beginning of the transaction (www.nar.realtor).
Clear Breakdown: Buyers and sellers receive a detailed breakdown of who is paying what (NerdWallet: Finance smarter).
Negotiability:
Flexibility: Commissions are no longer fixed, allowing for negotiation (www.nar.realtor).
Custom Agreements: Buyers and sellers can create commission agreements that fit their unique situations (Deloitte United States).
Buyer’s Responsibility:
Direct Payment: In some cases, buyers may pay their agent’s commission directly (Deloitte United States).
Inclusion in Budgeting: Buyers need to factor this potential cost into their overall budget (NerdWallet: Finance smarter).
How This Affects Buyers
Increased Clarity
Upfront Costs: Buyers will have a clearer understanding of the costs they need to cover. Knowing the agent's commission rate upfront helps in budgeting and financial planning.
Negotiation Power: Buyers can negotiate the commission rate with their agent, potentially lowering their overall costs.
Potential Additional Costs
Direct Payment: In some cases, buyers might have to pay their agent's commission directly. This could mean additional out-of-pocket expenses at the time of purchase.
Inclusion in Loan: Some buyers might negotiate to have this included in their loan, affecting the loan amount and monthly payments.
How This Affects Sellers
More Transparent Transactions
Clear Costs: Sellers will see a more transparent breakdown of where their money is going, helping them understand the full cost of selling their home.
Potential Savings: If the buyer pays their agent's commission, the seller might save money on their side of the transaction.
Competitive Edge
Attracting Buyers: By offering to pay the buyer's agent commission, sellers might attract more buyers, making their property more competitive in the market.
Flexible Pricing Strategies: Sellers can adjust their pricing strategy based on how the commission is structured.
Practical Tips for Buyers and Sellers
For Buyers
Discuss Commissions Early: Have a conversation with your agent about their commission rate early in the process.
Budget Accordingly: Plan for the possibility of paying your agent's commission directly.
Negotiate: Don’t be afraid to negotiate the commission rate with your agent.
Understand Loan Implications: If including commission in your loan, understand how it affects your borrowing capacity and monthly payments.
Shop Around: Compare different agents' commission structures and services to find the best fit for your needs.
For Sellers
Understand the Breakdown: Get a clear understanding of the commission breakdown and how it impacts your net proceeds from the sale.
Strategize with Your Agent: Discuss strategies with your agent on how to make your property more attractive to buyers under the new commission structure.
Consider Covering the Buyer's Agent Commission: Offering to pay the buyer's agent commission could give your property a competitive edge.
Highlight Transparency: Use the transparency of the new law as a selling point to attract buyers.
Evaluate Market Conditions: Assess how local market conditions might influence your approach to commissions.
The Big Picture
This new law aims to bring more transparency and fairness to real estate transactions. While it introduces some changes to the traditional commission structure, it ultimately empowers both buyers and sellers with more information and flexibility.
Handy Resources
Want to learn more? Here are some tools to help you out:
NAR Official Announcement: Read the official announcement from the National Association of Realtors here.
Real Estate Commission Calculator: Use this tool to estimate commission costs.
Negotiation Tips: Check out these tips for negotiating real estate commissions.
Budgeting for Homebuyers: Understand how to budget for home buying with this guide.
Loan Inclusion Strategies: Learn about including commission costs in your loan with this resource.
Final Thoughts
At the Manoogian Group, we're committed to helping you navigate these changes with ease. Whether you’re buying or selling, we’re here to provide the insights and guidance you need to make informed decisions. Stay tuned for more updates, and don’t hesitate to reach out with any questions.
