Times are changing in the real estate industry. At least that’s what you hear when you tune into mainstream media. Almost everywhere you look you’ll hear from sources who say it will now be more affordable to purchase property because of the National Association of REALTORS® settlement and changes to their policies. However, what you might not hear are the details of how it will affect both buyers and sellers.

Below, we’ve outlined some common misconceptions about the NAR settlement to help you understand how this might affect you!

Misconception 1: This Settlement Changes How Real Estate Will be Practiced

In a way this is true, but it is important to understand that NAR is an organization established to market properties. Think of this organization as a club you’re forced to join because your employer stipulates that you must. Agents must be licensed under firms, who must also be licensed, and many firms dictate that each agent must be part of their local MLS. This local MLS is a member of NAR, making the agent a member of NAR.

The rules NAR imposes are above and beyond those of state or federal law. The settlement will only affect how the NAR organization acts and has, thus far, not affected other laws. Therefore, the practice of real estate is not changing dramatically in terms of state or federal legislation. However, NAR must institute two new rules for advertising properties based on the settlement terms which will apply to all members of NAR.

Misconception 2: Property Prices Are Going to Decrease and Become More Affordable

Property prices are a condition of the market. When sellers purchase for a certain price, they will rarely dip below that price when they list the property for sale. Properties may sit on the market a bit longer than they have in years past but there won’t be a massive trend across the nation of decreasing values.

Misconception 3: Buyers and Sellers Will Save a Ton of Money on their Transactions Now

Whether you save money is entirely up to you. Commissions have always been negotiable but that information is now in the spotlight. Sellers may choose to cover only enough commission for their real estate representative. If a seller chooses not to offer a commission for the buyer’s agent, it could decrease the number of buyers who would qualify to purchase their property.

The fact is that buyers would then be responsible for their agent’s commission. Those commissions are not included in the financing of a property so a buyer would need more cash at closing to pay their agent. This could leave some buyers with the hard decision of whether to purchase at a later date, purchase a cheaper home, or enter into negotiations and contracts without representation. Each party will need to ask themselves whether the costs outweigh the negatives.

Misconception 4: Sellers No Longer Pay for Buyer Agents

Historically, sellers have always been able to negotiate their agent’s commission fee while their agent has always been able to offer a portion of their fee to buyer’s agents. This method has helped increase the buyer pool and has been known to bring offers faster. Sellers should understand the risks before deciding on whether to stipulate how a commission is paid.

Since the NAR organization mostly serves the residential sector of the real estate industry, land and commercial sectors will be less impacted by the new NAR policies. These policies are not guidelines for an entire industry but merely for the members of this organization. They do serve as a reminder for all real estate professionals to have open and honest conversations with buyers and sellers about the types of representation available and what commissions specifically cover. This new spotlight will help empower buyers and sellers to understand and discuss these important details when making purchases in the future!

If you’ve got more questions about the NAR settlement, contact your local Land Professional today!