2024 NAR Settlement Updates

In a groundbreaking decision that’s stirring up the real estate world, the National Association of Realtors (NAR) has reached a landmark settlement, that will change the dynamics of real estate agent compensation nationwide. For decades, sellers have dictated the commission for buyers’ agents as a prerequisite for listing on an MLS, a tradition that has kept commission rates hovering between 5% and 6%. But now, all of that has changed.

The recent NAR settlement will remove the obligation for home sellers to offer commissions as a condition for MLS listings. This decision introduces a new approach to commission negotiations, a move that is expected to foster a more competitive and transparent marketplace. Although it may also challenge the current business models of some real estate agents.

This shift comes after a daunting $1.8 billion jury verdict against NAR last year, among lawsuits challenging the commission structure. This settlement, amounting to $418 million payable over four years, is a proactive step by the NAR to mitigate further financial risks and legal challenges, despite not admitting any wrongdoing. This settlement will be paid out to homeowners who claimed the 

Also included in the NAR settlement is a new requirement for buyer agents to secure written agreements with their clients, clearly outlining service charges. This ensures buyers are fully informed about potential fees from the get-go, allowing buyers to feel more empowered in their decision-making.

Offers of compensation help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers. They are also consistent with the real estate laws in the many states that expressly authorize them.

According to NAR, these commission changes are expected to “help make professional representation more accessible, decrease costs for home buyers to secure these services, increase fair housing opportunities, and increase the potential buyer pool for sellers”. This change reflects a significant transformation in how real estate agent services are valued and compensated in real estate transactions, paving the way to greater potential profits for real estate agents nationwide.

To summarize the 2024 NAR Settlement, these are the biggest changes in July 2024.

1. Liability Release: Offering unparalleled immunity in the seller class action suit, this extends to over a million NAR members, numerous state and local associations, MLSs owned by associations, and a vast majority of realty firms.
2. Restriction on MLS Compensation Offers: The MLS would no longer allow compensation offers. Nevertheless, consumers still have the liberty to negotiate compensation off-MLS, in consultation with their real estate advisors. Additionally, sellers retain the option to propose buyer incentives directly on the MLS, such as closing cost contributions.
3. Mandate for Explicit Buyer Representation Contracts: A forthcoming regulation stipulates the necessity for explicit buyer representation agreements before any property showings. Initiatives are already in motion within Illinois to adopt such prerequisites. The IDFPR is in the process of incorporating these mandates into the Illinois Real Estate License Act.

As we approach the July enforcement data, it’s important to stay informed and prepared for these significant changes. Whether you’re buying, selling, or simply keeping an eye on the market, understanding these changes will empower you to make more informed decisions.

At Pearson Group LLC, we’re committed to helping you navigate these changes. Pearson Realty Group has 100+ dedicated Chicagoland real estate agents serving all niches and property types. Our brokerage is complemented by our sister company, PRG Management, a Chicago property management company that manages over 2,000 units across the Chicagoland area. If you’re a homeowner looking for a change or an investor trying to maximize your ROI, Pearson Realty Group and PRG Management are here to help you through the ever-changing real estate world.