The National Association of Realtors’ new standards took effect exactly one month ago, changing the national real estate market. The guidelines, the consequence of years of litigation and a settlement, aim to increase transparency between homebuyers and sellers and their brokers and their compensation.
How will that affect our community and housing market? Despite headlines, local real estate experts say little.
The sellers usually paid a commission fee to the buyer’s agent, which was reflected into the home’s price. The commission could be specified in an agency’s Multiple Listing Service (MLS).
However, the 2019 Missouri homebuyers class-action complaint that led to the NAR’s settlement claimed certain commissions were exaggerated and brokers steered clients toward higher-paying houses. The NAR settled with sellers for $418 million and created new agency regulations, but it disputes wrongdoing.
This internal service for real estate agents no longer lists compensation rates for advice; principals and agents must now negotiate rates. According to the NAR, homebuyers must sign with agents early in their rate research, not midway or at the end.
North Carolina is one of 18 states that formally practices buyer’s agency, which allows homebuyers to work with an agent distinct from the selling principle. The national transformation framework is basically set.
“In general, the finite minutia is shifting a little bit,” says Orange-Chatham Association of Realtors president-elect Kristine Holm. “Practically, it’s not an adjustment. We still provide the same care, diligence, and fiduciary responsibility to our clients as per our contracts. The thinking and paperwork have altered.
Holm says all rates were changeable before, but new adjustments will assist buyers and sellers understand their commissions and rates. A documented buyer-broker agreement is essential before an agent may show customers properties.
“You need buyer agency to cross a threshold in a home, in North Carolina or anywhere in the country,” adds Holm. Because we are professionals, it’s just a sooner conversation that requires you to create client trust and provide value sooner.
She says, “We have to explain, there is not an essence that has changed in how we represent our clients and conduct our business – it’s just a timing that has changed in North Carolina.”
Holm believes these adjustments are only causing a “little ripple” in the local property market. She believes limited home inventory is in keeping with market trends and advantages sellers. That emphasizes the importance of a buyer’s agent for their clients, and the new NAR guidelines reinforce that.
Established Realtors in high-demand markets like the Triangle may claim that their daily operations and client strategies will not change.
Desiree Goldman leads the Desiree Goldman group and is a BOLD Real Estate broker associate. After 25 years in the market, she says her connections with clients are upfront about home prospects, market amenities, and rates.
“I get to make up what I claim are my practices, what my fees are,” Goldman says. “That’s true for everyone. Everything has always been negotiable.”
Independent Chapel Hill broker Sammy Martin runs Franklin Street Realty. He believes his group has led the way in safeguarding purchasers by not letting brokers represent both sellers and buyers and explaining commissions to clients.
Martin argues that buyer’s agency rights make “perfect sense,” and while it’s wonderful that the rest of the U.S. will have them, Franklin Street Realty finds the NAR’s modifications minor.
Martin argues it would aid purchasers in the 32 states without buyer’s agency. But what outrages me—and this is my personal beef—is that I’ve done it this way for 30 years. This transformation suddenly becomes a national news story that is rocking real estate to its core. We operate on a different ethical level than these other states, so it’s not shaking our foundation.”
Martin believes these national improvements will not lower home prices beyond increased buyer and principal openness. Since buyer’s agent commissions are no longer required, he doubts sellers will lower their asking price.
“First-time homebuyers will be hurt as long as they won’t allow that buyer commission to be rolled in and added to the house price,” adds Martin. “Unless sellers agree, ‘nothing was really broken in North Carolina, so there’s no real reason to change anything here.’ The only thing that’s changed is that the MLS no longer lists what my agents or I might get paid.
Goldman calls the NAR updates a “work in progress,” as clarifications were given over the first month. In a challenging market like Chapel Hill and Carrboro, she suggests a method that fits these new requirements and may help someone find a new home.
“Find your buyer’s agent first and then do your search,” suggest Goldman. “Because they’ll add community and regional context.”