BUSINESS QUARTERLY: Dan Petrone – A guide to the commission settlement

Dan Petrone


Published: 04-23-2024 8:35 AM

The National Association of Realtors (NAR) recently reached a settlement regarding commissions.

The settlement stems from accusations of anticompetitive practices within the real estate industry, particularly focusing on the structure of commissions and the supposed lack of transparency surrounding them. Critics have long argued that the traditional commission model, often a percentage of the sale price, creates an environment where fees remain artificially inflated, ultimately impacting the cost of home-ownership for buyers, and diminishing returns for sellers.

The objective here for buyers is to gain a clearer understanding of the costs associated with purchasing a home. The idea is that by shedding light on commission structures, buyers may be better equipped to negotiate deals and navigate the financial aspects of their real estate transactions more effectively.

Similarly for sellers, transparency surrounding commissions increases. With a clearer understanding of the fees involved in selling their homes, sellers can make more-informed decisions when selecting real estate agents and negotiating commission rates.

The concept is to create a more-competitive environment among real estate professionals, potentially leading to more favorable terms for sellers. However, it is important to recognize that commissions have always been negotiable for both buyers and sellers in a real estate transaction. In fact, over time, the average commission rates have shown a downward trend, reflecting the evolving dynamics of the real estate market.

In New Hampshire, this transparency is particularly pronounced, with clear documentation outlining relationships, the total compensation and its distribution between listing and selling brokers.

Furthermore, the settlement makes clear that NAR continues to deny any wrongdoing in connection with the Multiple Listing Service (MLS) cooperative compensation model. NAR has long said that cooperative compensation and NAR’s current policies are good things that benefit buyers and sellers. They promote access to real property ownership, particularly for lower- and middle-income buyers who can have a difficult-enough time saving for a down payment.

NAR continues to believe that 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.

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Potential changes in July:

■ Offers of compensation cannot be put on the MLS.

■ A buyer’s representation agreement will need to be in place to show you properties, clearly defining the scope of work, services and compensation.

The types of compensation available for buyer brokers would continue to take multiple forms, including but not limited to fixed-fee commission paid directly by consumers or concession from the seller or a portion of the listing broker’s compensation.

Despite these changes, the role of Realtors remains as crucial as ever in the real estate process. While advancements in technology have undoubtedly transformed the way homes are bought and sold, the expertise and guidance provided by real estate agents remain invaluable.

Realtors bring a wealth of knowledge and experience to the table, offering personalized guidance tailored to the unique needs and preferences of their clients. From pricing strategies to negotiation tactics, real estate agents play a pivotal role in guiding buyers and sellers through every step of the transaction process.

Moreover, Realtors serve as trusted advisors, offering insights into market trends, neighborhood dynamics and legal considerations that may impact the buying or selling process. In an increasingly complex real estate landscape, the expertise and guidance of a knowledgeable real estate professional can make all the difference in achieving a successful outcome.

As the dust settles on the NAR settlement and the real estate industry adapts, one thing remains abundantly clear; Realtors continue to play an indispensable role in helping buyers and sellers navigate the intricacies of the housing market. Agents literally perform hundreds of tasks to ensure a smooth and successful transaction for their clients.

In a world where information is readily available at our fingertips, the human touch and expertise provided by real estate agents remain as valuable as ever. Buyers and sellers alike want and need representation, in what is for many, the largest transaction of their lives. There will be a time of adjustment, but this is nothing new in the ever-changing real estate industry.

Dan Petrone is a Realtor in partnership with Bean Group in Peterborough.