Starting on August 13, 2024, new rules from the National Association of Realtors (NAR) will change how real estate agents are compensated, and it's important for both buyers and sellers to understand what this means.

For Buyers:

In the past, buyers often didn't think much about how their real estate agent got paid. Typically, the seller would pay the commission, which was then split between the seller’s agent and the buyer’s agent. Under the new rules, things are becoming more transparent. Buyers will now have a clearer understanding of how much their agent is being paid, and in some cases, they might need to directly negotiate or pay their agent’s fee.

One of the significant changes is that buyers (or tenants) will now need to sign and agree to new representation agreements, even for the initial showing of a property. This means that before any property tours, both parties must be clear about the compensation details. This ensures that there are no surprises later on regarding how the agent will be paid.

Additionally, when submitting an offer on a property, an Addendum for Compensation will need to be included. This document outlines the agreed-upon compensation terms and ensures that everyone is on the same page before moving forward with the purchase or rental process.

For Sellers:

For sellers, the new rules bring a shift in how you might approach paying commissions. Traditionally, sellers paid a set commission that covered both their agent’s fee and the buyer’s agent’s fee. Moving forward, while you can still offer to pay the buyer’s agent, you have more flexibility. You might negotiate these terms more openly with your agent, or the buyer might take on the responsibility of paying their own agent.

The inclusion of the Addendum for Compensation when an offer is submitted also affects sellers. This ensures that all terms related to compensation are transparent and agreed upon, reducing the likelihood of disputes later in the transaction process.

What This Means for Both Parties:

Overall, these new rules encourage transparency and fairness in real estate transactions. Both buyers and sellers will have a better understanding of where their money is going and will have more options to negotiate terms that work best for them. The requirement for new representation agreements and the Addendum for Compensation ensures that all parties are clear on compensation terms from the start.

It’s a good idea to have open discussions with your real estate agent about these changes, so you fully understand how they impact your specific situation. These adjustments are intended to make real estate transactions more straightforward, helping both buyers and sellers to make informed decisions.