By now most of you have heard about the recent court rulings in lawsuits against the National Association of Realtors (NAR). The case is complicated and full details are available on various sites. Below is a summary of the changes that have been in effect since the summer of 2024.

What did the courts decide?

First, the lawsuits were not about fixed 6% commissions. I can’t speak for the rest of the country, but in New Jersey commissions have always been negotiable, and I haven’t seen 6% in at least 15 years.

The courts decided that, among other things, home sellers must be made aware that they are not required to pay the buyers’ agent’s commission. This has always been optional, and going forward sellers can decide whether or not it is in their best interest to do so.

What changes were made in 2024?

The courts ruled that real estate agents working with buyers are now required to enter into a Buyer Agency Agreement with every client they actively represent.

The terms of the Agreement outline the details of how the agent will work with the buyers, and specifically state that buyers are responsible to pay the agent’s commission if they wish to be represented by him or her.

It is possible, and in fact very likely, that the buyers’ agent’s commission will in fact be paid by the sellers, but that depends on the individual sellers of the homes shown to buyers by their agent.

How does this affect sellers?

Listing agents explain to their seller clients that the purpose of splitting their commission with buyers’ agents is to entice those agents to show their home and bring an offer. There are thousands of agents associated with a Multiple Listing Service (MLS), and offering them a split of the listing agent’s commission increases the odds of the sellers getting multiple offers.

Sellers may decide to offer their listing agent a lower commission that will not be split with the buyers’ agent. They will have to weigh the benefits of doing so against the possibility that they will get fewer, and possibly lower, offers as a result.

How does this affect buyers?

Depending on the terms of their Buyer Agency Agreement, it is possible that buyers do not have to pay their agent’s commission if the seller is offering to do so. It is also possible that the sellers of the home they absolutely love will not pay the buyer’s agent’s commission, and the buyers will have to do so themselves.

Depending on how the market reacts to this change going forward, it is possible that buyers as a group may have to allow for additional funds to buy a home on top of their down payment and closing costs.

Will home prices come down as a result of this change?

One of the talking points you may have heard about this ruling is that home prices may come down as a result of the changes. Considering that the lawsuits were brought by sellers who objected to losing money, it is highly unlikely that they will lower the asking price of their home to compensate for the reduced commission.

If more and more buyers are put in a position to have to pay their agent’s commission, this will result in a widespread situation where buying a home will become more expensive, not less.

What if buyers simply stop using real estate agents to represent them?

For those old enough to remember, this was the norm several decades ago. Then consumer advocacy groups and the real estate industry itself realized that buyers were being hurt by having no representation when purchasing a home, and buyers’ agents were introduced.

In case you’re wondering, listing agents will no longer be able to represent both the sellers and the buyers, as their loyalty and responsibility will be strictly to the sellers.

And if you feel that you can go against a listing agent alone because you know enough about real estate from speaking to family and friends and reading articles on the Internet, I invite you to compare that to what I offer to my buyer clients to make their purchase transaction smooth and stress-free.

Disclaimer

The above opinions are my own. There are some questions about the court rulings that may come up as these new regulations take hold, and even real estate brokerages, attorneys and lenders see issues that may need to be resolved. Send me a message or call me at 732-501-3347 to discuss these issues and ask questions of your own.