The NAR Law Went Into Effect This Month: What You Need to Know
As of August 17th, 2024, a significant change has taken effect in the real estate industry – particularly in how compensation for the buyer’s agent is disclosed. The new NAR Law has altered the Multiple Listing Service (MLS), which no longer displays whether a seller is offering compensation to a buyer’s agent. This change raises important questions: What does this mean for buyers and sellers? How will it affect your real estate transactions?
Let’s break it down.
What Changed in July?
Since July 1st, Iowa buyers working with a buyer’s agent have been required to sign a Buyer Representation Agreement before touring properties. This agreement clearly outlines the agent’s compensation and how it will be paid upon closing. For buyers, this transparency offers the opportunity to make informed decisions when selecting an agent, as the agreement details not only the commission but also the agent’s role, contract term, and the types of properties being considered.
Importantly, this agreement ensures that buyers are fully aware of any potential out-of-pocket costs if the seller does not contribute to the agent’s commission.
MLS Changes in August: What You Need to Know
The MLS serves as the primary source of information about properties on the market, with data feeding into third-party sites like Zillow. Previously, the MLS included a field labeled “Commission to the Cooperating Broker” (CCB), indicating whether the seller was offering to pay the buyer’s agent’s commission.
As of August 17th, this field has been removed. However, sellers can still choose to cover part or all of the buyer’s agent’s commission; it just won’t be as easy to find this information. To determine whether a seller is offering CCB, buyer’s agents will now need to contact listing agents directly or look for other indicators, making the process more cumbersome.
Do Sellers Usually Pay the Buyer’s Agent’s Commission?
While sellers are not required (and never have been) to pay the buyer’s agent’s commission, many choose to do so to attract more potential buyers. Offering compensation can make a property more appealing, increasing the likelihood of multiple offers. However, with the recent changes, the decision to offer CCB has become a strategic choice the sellers must carefully consider.
The Long-Term Effects of These Changes
The removal of the CCB field from the MLS introduces a layer of uncertainty into the buying process. Without clear visibility into whether a seller is offering to cover the agent’s commission, buyers may be hesitant to pursue certain properties – especially if they cannot afford to pay the commission out of pocket. This lack of transparency may also lead some sellers to refrain from offering CCB altogether, potentially reducing the pool of interested buyers.
For buyers on a budget, knowing whether a seller is contributing to the agent’s commission is crucial. If a property does not offer CCB, it may be less attractive compared to a similar property that does, leading to fewer offers and potentially a lower final sales price.
Additionally, some buyers might opt to represent themselves rather than work with an agent. While this may seem like a cost-saving measure, it can lead to complications, especially for first-time home buyers. Including over paying for the home. Sellers, too, may be wary of buyers without agent representation, as they prefer transactions to proceed smoothly with experienced professionals.
Should Sellers Offer CCB?
Given the potential downsides of not offering CCB, it may be in the seller’s best interest to provide at least partial compensation to the buyer’s agent. Doing so can broaden the pool of potential buyers, increase the competition, and lead to a higher sale price with more favorable terms.
Despite the challenges posed by these MLS changes, offering CCB can be seen as a strategic move – a way to ensure that the transaction is handled efficiently and to differentiate the property in a competitive market.
Final Thoughts
These changes to the MLS may reduce transparency regarding agent compensation, but sellers should still consider offering CCB as a way to attract more buyers and facilitate a smooth transaction. A knowledgeable real estate agent can guide both buyers and sellers through these changes, ensuring that all parties are informed and prepared.
If you have any questions about these changes or their implications, we’re here to help. We also work with a network of trusted Realtor partners and would be happy to connect you with one. Don’t hesitate to reach out!