San Diego: What To Expect From The 2024 NAR Commission Settlement

Last week, The National Association of Realtors announced that it finally reached a settlement agreement with home sellers who have claimed the organization unfairly inflated commissions and forced them to compensate buyers’ agents. This settlement comes at the conclusion of what has been a very costly and drawn-out legal battle for the NAR, and it has left many buyers and sellers with questions about what this means for their future real estate transactions. Here is an overview of the terms of the settlement (which is still pending court approval at the time this article was written) and the potential effects it may have on San Diego, California, and the real estate industry at large. 

2024 NAR SETTLEMENT TERMS

• The National Association of Realtors has agreed to pay $418 million over the next four years to end litigation.
• The settlement resolves ongoing claims against the NAR, all state and local Realtor associations, all association-owned multiple listing services (MLS), all brokerage firms that have an NAR member as principal and recorded a sales volume below $2 billion in 2022, and more than a million individual NAR members (including agents and brokers). 
• Offers of broker compensation will be prohibited on the MLS. However, compensation will continue to be negotiated by the consumer and agent, directly and privately.

WHAT THE NAR SAYS

The NAR maintains that while this settlement is the best available course of action for both consumers and real estate professionals, it denies that any wrongdoing has occurred. The organization has emphasized that a cooperative commission split between a seller’s agent and buyer’s agent is a long-standing and widely accepted standard of practice in our industry. 

However, reaching acceptable settlement terms will provide a viable path forward as we all work to protect the integrity of the profession as well as consumer choice. The NAR’s interim CEO, Nykia Wright has explained that continuing to litigate this case would hurt members and their small businesses. 

ANTICIPATED EFFECTS ON REAL ESTATE

While you may come across headlines about how this will make home buying more affordable or it may change the way we buy and sell homes, I suspect that these stories are transient and sensational. 

Keep in mind that home valuations are dictated by the laws of supply and demand, which are affected by factors such as location, recent comparable sales, age and condition, and more. Agent commissions are an afterthought when it comes to market values. 

In fact, on the matter of housing affordability, some would argue that the long-standing commission structure has been one way that buyer representation was made more accessible. It had the direct effect of reducing a buyer’s up front costs and more indirectly increased the pool of prospective buyers. Because the commission was often a responsibility of the seller, it allows buyers to consider homes at a higher price point.

In the future the discussions surrounding commission structure and buyer representation may change, and buyers may become more attuned to the value of professional representation, but we expect the nature of the relationship to remain largely unchanged. That is, the way your Realtor performs for you and the process of the transaction will be the same. 

Keep in mind that commission fees in San Diego have always been negotiable, and they often are. These fees were always the product of an agreement between client and Realtor, rather than being a default figure. 

Moreover, our industry has always had its low cost providers, and clients have often found themselves lacking the service they expect. Just as it is in other areas of commerce, you typically get what you pay for. This may be a growing concern for buyers wishing to retain top notch representation, so some caution should be taken when choosing the right Realtor for your home buying needs. 

We are very fortunate in California to have buyer’s agency because 37 states in the United States do not have buyer representation. When choosing a Realtor to represent you as a buyer, remember that your home is the most significant purchase you will make in your lifetime. Having a high-performing Realtor on your side is critical to achieving the best possible outcome for your transaction. You simply can’t put a price on the value of expertise as you navigate the challenges and complexities of real estate. 

If you have questions or concerns about the NAR settlement and how this might affect you as a buyer or seller in San Diego, contact me to request a consultation. I would be happy to discuss the change with you and help you better understand what to expect.