Understanding the NAR Settlement and How It Impacts NC Home Buyers

Earlier this year, the National Association of REALTORS® (NAR) proposed a settlement in a lawsuit about how buyer agent compensation is presented. There has been a lot of misinformation, even from well meaning sources. Adding to the confusion is that this affects how real estate is conducted nationwide, even though each state has its own contracts and procedures already in place. What is true is that there are some changes happening in August that will impact both sellers and buyers. Let’s look at what those changes mean for buyers here in North Carolina.

First, Let’s Start with the Facts:

• What was the lawsuit about? The lawsuit argued that the way the NAR made sellers pay buyer agent fees inflated home prices and broke antitrust laws. In the Triangle area, this fee could be as little as $1.
• What’s changing now? Buyer agent fees can no longer be shown in the Multiple Listing Service (MLS). Buyers must now have a written agreement with their agent before seeing homes. And, the amount of the fee is up for negotiation. It doesn’t have to be a percentage of the home price.
• Does this mean that sellers aren’t allowed to pay buyer agent fees? Not at all. Sellers may still offer buyer agent compensation, it just cannot be listed in the MLS. 
• Why would sellers want to pay buyer agent fees? It makes it easier for buyers to buy a home. Lenders won’t let you add this fee to your mortgage, and some government-backed loans used to forbid buyers from paying it at all. Including it in the sale price meant fewer out-of-pocket costs for buyers.

So What Does This Mean for Buyers:

There is a potential for higher out of pocket costs.

You might have to pay your real estate agent’s commission directly, adding to your down payment and closing costs. The NC buyer agency agreement already made clear that the buyer was responsible for the buyer agent commission, but that it would be sought from the seller first. That has not changed. Now that an offer of compensation may not be as readily apparent, it’s important to find out before making any offer, or even touring a property, if this buyer agent fees are being offered and, if not, decide if this is a property that fits your budget.

You can negotiate the fee with your agent before you start working together.

This could be a flat fee, hourly rate, or a percentage of the sale price. Be sure to ask about all the services they offer, so you don’t miss out on anything important. This has always been true. Buyers were less concerned in the past because Clear Cooperation between firms meant that the buyer agency commission paid by the seller, if it was being paid by the seller, was public knowledge.

You have to sign an agreement with your agent before seeing any homes.

NC has always required a written buyer agency agreement prior to an offer being presented, but there used to be an option for a non-exclusive verbal agreement. Now a written agreement, exclusive or non-exclusive, must be signed prior to previewing a property.

Home prices may drop but buying costs will increase.

One of the predicted outcomes is that home prices will drop if buyer agent compensation is not included in the price. That remains to be seen as the market adjusts to the new rules. What is clear is that buyers paying their agent’s fees directly will increase their upfront costs, potentially making homeownership more challenging.

My Biggest Worry for Buyers in North Carolina

In North Carolina, we have something called “due diligence,” which is different from other states. Here, every home is sold “as-is,” meaning the seller doesn’t have to do any repairs, lower the price to match the appraisal, or any number of other items other states would have a contract contingency for.  As a buyer, you can back out of the deal for any reason during the “due diligence period,” but you lose the due diligence fee you paid to the seller when your offer was accepted. The due diligence fee is a negotiable contract term that tends to run in the thousands in the North Carolina Triangle and Triad area markets, and it’s not uncommon to see five digits for highly competitive properties in certain areas.

• If you don’t have an agent, you could lose a lot of money if the deal falls through. An agent can advise you and advocate on your behalf so that you can avoid unnecessary and costly risks.
• If you use the seller’s agent, aka, a dual agent, you won’t have anyone looking out for your interests. They can’t advocate for you against the seller because if they represent both of you then they have a duty to be impartial to both sides. They do have a duty to disclose material facts and to not disclose confidential information, but cannot advise you on negotiating a concession.

*It’s important to note that it’s more common than not for a seller to negotiate. After all, they want to sell the house. That doesn’t mean that they have to. If the buyer & seller cannot come to an agreement, the buyer has to decide whether or not to walk away and lose that money.

So, How Do You Choose the Right Buyer Agent?

• Ask for referrals from friends who have bought or sold recently
• Don’t chose an agent just because they are a friend or relative.
• Interview them before you start looking at homes. 
• Download our free guide: “10 Questions to Ask When Interviewing Buyer Agents”
• Schedule a free consultation to discuss your specific needs and concerns.

Buying a home is a big decision, and having the right agent on your side can make all the difference!