Two months after the biggest changes to the American real estate industry in decades, experienced agents and newbies alike are still sorting out the impact — and the best ways to respond.
The NAR settlement commission overhaul has forced Realtors everywhere to adapt their tactics, whether they work with buyers, sellers, or both groups. Here are some of the biggest takeaways from Clever’s recent survey of 516 active real estate agents and 1,000 homeowners and potential buyers.
1. Talk to Clients About the Changes
Real estate professionals have likely been following the ins and outs of the NAR lawsuit, but that’s certainly not the case for the average person, even those planning to buy or sell homes in the near future. In Clever’s survey, nearly 4 in 10 buyers (39%) either don’t understand the settlement or haven’t heard about it at all, while just 43% of homeowners who plan to sell in the next year say they have a strong understanding of the impact.
Agents should ensure they go over the new commission rules with buyers and sellers early on in the process, particularly for those who have bought or sold homes under the old system. Clearly pointing out the differences and how they’ll affect the transaction will help avoid surprises later.
2. Use Short-Term Showing Agreements
On a practical level, one of the most significant changes is the new requirement for buyer’s agents to get potential clients to sign agency agreements ahead of any showings. This critical step could wait under the old system, where agents could count on the seller’s commission for their compensation. However, the new rules mean that agents who don’t get these agreements from clients could lose out on getting paid for their work. Still, many agents reported buyers felt uneasy signing a contract before getting to know their potential agent.
The compromise may be short-term showing agreements, which 43% of agents surveyed are using. These typically provide a single showing or a handful over a short period for no cost while ensuring an agent is compensated if a buyer moves forward on a property.
3. Provide Detailed Cost Breakdowns
Transparency is increasingly critical in real estate transactions. In Clever’s survey, about three-quarters of homeowners (79%) and potential buyers (71%) believe real estate agents should be required to disclose their commission rates upfront. Under the old system, many home buyers and sellers may have mostly ignored commission costs, looking at them as an unavoidable expense. However, these new rules have changed the focus for many, causing them to take a closer look at precisely what those thousands in commission costs are really going toward.
A common tactic to put clients at ease is to provide detailed cost breakdowns. Around 42% of agents tell Clever they’ll be doing this going forward, educating buyers and sellers about the sometimes significant costs that agents incur long before any deal is finalized. This can be especially valuable for the roughly 1 in 6 agents (17%) who plan to go further, offering a la carte service options.
4. Be Flexible With Commission Rates
Advocates for the overhaul argued it would cause commission rates to fall over time, which is good news for buyers and sellers but bad news for agents.
Looking ahead, listing agents told Clever they plan to offer a 2.60% average concession that can be used as a buyer’s agent commission. This is a change of -0.13% from the average buyer’s commission rate before the NAR lawsuit. On average, agents report that the lowest buyer’s commission rate they would accept would be 2.08%. However, 55% of respondents indicated that the lowest rate they would accept is 2.00%.
Agents should be prepared to adjust their compensation going forward or offer additional services to justify a higher-than-average commission.
5. Don’t Freak Out
With any major industry shakeup, it’s understandable to be hesitant, especially when it affects your bottom line. In Clever’s survey, almost half of the agents (48%) said their overall outlook on their real estate career has become more pessimistic since the NAR lawsuit settlement was approved. Meanwhile, agents used the words “confused,” “confusing,” or “confusion” to describe their feelings on the settlement more than any other terms.
However, the situation isn’t nearly as dire as some agents may think. Although two-thirds of agents (66%) believe buyers will become more hesitant to use a Realtor due to the NAR settlement, just 22% of homeowners and potential buyers say they’ll be less likely to do so. In addition, more than half of homeowners (54%) and future buyers (58%) believe real estate agent commissions are justified, given the services Realtors provide.
While the post-NAR settlement commission situation will take some time to sort out, smart agents won’t overreact and will instead work to figure out the best way to adapt their business to the new rules.
Read the full report here: https://listwithclever.com/research/realtor-commission-changes-2024/