What’s Happening in the Industry | September Issue

The recent settlement between the National Association of Realtors (NAR) and various plaintiffs in antitrust lawsuits is set to bring significant changes to the real estate industry, impacting agents in Chicago and across the U.S. The $418 million settlement addresses concerns that NAR's policies inflated residential real estate prices and unfairly burdened home sellers. As part of this settlement, two major changes are now in effect:

MLS Policy Changes: The settlement prohibits offering broker compensation on the Multiple Listing Service (MLS). Previously, brokers would confirm their compensation and determine how much of that fee would be shared with the representing brokers and display it on the MLS. Now, any offer of compensation to agents must be negotiated separately and communicated outside of the MLS.

Written Representation Agreements: Consumers are now required to sign a written agreement with their brokers before they can tour homes. This agreement must clearly specify the broker's compensation and terms of service. While this was always the case, this enforcement increases transparency and formalizes the relationship between clients and their advisors.

What does this mean for buyers? The recent NAR settlement brings several advantages to homebuyers, giving them greater control over the home-buying process and the associated costs. Buyers can benefit and take charge of negotiations moving forward by:

Greater Negotiating Power: With commission structures now evolving, buyers have increased leverage in negotiations. Buyers can negotiate directly with their agents on the structure of payment or for the seller to cover the buyer’s agent’s fee as part of the closing deal. Some lenders and title companies might also allow commission payment to be rolled into the final closing settlement. This flexibility can lead to cost savings for buyers, especially in a competitive market.

Flexible Service Models: The settlement is starting to encourage a shift towards more diverse service models, such as flat fees, hourly rates, or a la carte services. Buyers can choose the service model that best suits their needs and budget, rather than just agreeing to the traditional commission-based arrangements. This flexibility allows even first-time home buyers the ability to tailor their real estate experience.

Empowerment Through Written Agreements: The requirement for written agreements between clients and their brokers before any home tours begin is another advantage. These agreements clearly outline the services provided and the compensation expected and agreed to, reducing the likelihood of misunderstandings. It also confirms the seriousness of the consumer. 

For those looking to buy, sell, or rent nationwide, this means it is crucial to find an advisor who is informed and already in compliance with these regulations. For those experienced agents, this change really isn’t a major adjustment since these forms were already created and in effect. What’s really changed is their enforcement. There is the possibility of brokers genuinely exploring alternative pricing structures, such as flat fees, hourly rates, or a combination to capitalize in a changing market. However, percentage commissions are likely to stay as common practice.

From a state level, in Illinois, additional changes to real estate laws will complement the NAR settlement. These include mandatory written agreements for all real estate brokerage services and adjustments to licensing requirements. The Illinois REALTORS® association has been active in educating both the public and industry professionals about these changes, which could reshape how business is conducted in the state.

For more detailed information on how these changes impact Chicago agents, you can read more on Chicago Agent Magazine.