Litigation brought against the National Association of Realtors® (NAR) neared its conclusion in March when NAR agreed to institute certain rule changes that are expected to alter the way homebuyers and sellers interact with real estate agents—and how agents are paid.1
Historically, typical real estate transactions resulted in a 6% commission for real estate agents, with half going to the seller’s agent and half going to the buyer’s agent, all of which was paid by the seller.2 An offer of commission was typically listed on an MLS (the databases real estate agents use to share properties). Under the terms of the March settlement, offers of commission will likely no longer be allowed to be listed on MLS listings.3
Beginning August 17,4 the 6% agent commission will no longer be the assumed norm, opening the door to much more price negotiation not only with sellers, but with homebuyers as well.5 (The court will hold a final approval hearing for the settlement on November 26, 2024, and NAR believes the deal is very likely to be approved.6) Real estate professionals across the country are wondering how these rule changes will shape the future of residential real estate—and impact them directly.7
This got the team at Newrez thinking: What about buyers and sellers themselves? How do they think and feel about the homebuying experience, given the coming shifts?
To answer those questions, we went to the source and surveyed some of our over three million customers. Most of our respondents are already homeowners, and they ranged broadly across income brackets. Notably, respondents also spanned a wide age range, but nearly a third were 65 or older.
Below are our top five insights we gleaned from the survey. These insights not only offer a window into the perspective of potential homebuyers, but also suggest some useful ways real estate agents might differentiate themselves to compete in a changing marketplace.
1. Trust and honesty rule.
When asked the most important quality in a real estate agent assisting with a home purchase, respondents were unequivocal—trustworthiness and honesty are, far and away, the most vital attributes an agent can demonstrate. In a distant second was “knowledge of the local market.”
The results bolster what many real estate agents already know:8 if you aren’t building client relationships based on trust, you’re unlikely to succeed in the industry. An agent who comes across to buyers as dishonest, misleading or “fake” probably won’t get many return clients, let alone word-of-mouth referrals. Buyers need to feel that their real estate agent is operating with their best interest at heart at every stage in the buying process.
The runner-up quality of “knowledge of the local market” can’t be discounted here, either. Agents wanting to set themselves apart to buyers may want to emphasize their keen awareness of the communities they cover.
This isn’t the only time in our survey that the specialized expertise of a real estate agent came up as an important factor to buyers. We’ll discuss this more later.
2. Two-thirds don’t know about the NAR settlement or its impact.
When respondents were asked if they were aware of the settlement “regarding the prohibition of offers of compensation in real estate transactions,” two-thirds admitted not knowing what it was.
We’ll delve more into the implications of this lack of awareness in insight #3, but if you’re foggy on the details of the settlement, see a refresher below:
A Quick NAR Settlement Summary:
Home sellers filed more than a dozen class-action lawsuits alleging that NAR imposed rules that inflated real estate commissions.9 NAR settled in March 2024, though NAR denies any wrongdoing.10 The court granted preliminary approval of the settlement in April of this year and a final approval hearing is set for November.11 Here is what is likely changing:
- NAR has agreed to pay a $418 million settlement in addition to eliminate a decades-old rule dictating that when a home is listed for sale on an MLS, an offer of commission must be made for the agent who brings in the buyer.12
- Though NAR contends that real estate commissions have always been negotiable, the rule has historically resulted in a 6% commission paid by the seller.13
- This shift opens the door to sellers negotiating lower commissions for agents, and buyers entering the negotiation fray as well.
- This might offer buyers and sellers more flexibility in terms of selecting the specific services provided by agents or finagling unique pay structures, but it also means buyers could be saddled with more expense than they bargained for.14
For more information, explore the sources provided at the end of this article.
3. Interest in the settlement and its ramifications is lukewarm.
While housing market professionals may be wringing their hands about the rule changes, does the average person care? The answer is tepid. While more than half of respondents said they had at least some interest in the topic, nearly 42% of respondents to our survey said they were either “not very” or “not at all interested” in the settlement or its consequences.
It could be simply that many people haven’t heard about NAR and what it represents, they don’t plan to enter the housing market anytime soon, or they’re too busy to tune in. Whatever the reason for the lack of awareness and interest, real estate agents could find themselves frequently explaining these changes to clients.
The silver lining here? This could present an opportunity for agents to showcase the value of their services and expertise to buyers and offer a menu of potential pricing tiers. Many buyers may not be thrilled to dive into price negotiations without a guide and might appreciate a real estate agent giving them some structure to use as a jumping-off point.
4. Buyers will pay for expertise and primo price negotiation.
Now that buyers may be doing more negotiating with their real estate agents on pricing and specific services rendered,15 it’s especially relevant to know what actions by a real estate agent make homebuyers feel they’ve gotten their money’s worth.
The question reads, “What are the most important actions a real estate agent should take to earn their commission?” Respondents were able to rank six actions in order of importance.
About half of our respondents said that real estate agents providing “expert advice and guidance throughout the homebuying process” was most important for earning a commission. In other words, when buyers negotiate a pay structure with a real estate agent, receiving well-informed insights and getting questions answered are paramount expectations for many.
About a third of respondents said that an agent negotiating “the best possible price and terms for the home” was most important to them, and another third of respondents said this was the second-most important action listed. It seems that many homebuyers would be willing to spend money with an agent up front in order to save money on their home.
The third, fourth and fifth most important actions were clustered closely together in our results. “Conduct thorough property searches and showings” took third, “Ensure clear and frequent communication and updates” took fourth, and “Offer support and assistance with paperwork and legal aspects” came in fifth.
The results signal that real estate agents should continue to showcase their market and industry expertise while also highlighting their negotiation skills so buyers and sellers know precisely what they’re paying for.
5. Positive experiences unlock referrals.
This result probably won’t come as much of a surprise to experienced real estate agents: The best way for real estate agents to snag a client referral is to give the client a great overall experience.
We pitted “positive previous experience” against beneficial real estate agent attributes like “ability to understand and meet your needs,” “high level of customer service” and “personal rapport and connection.” Nearly half of respondents said that a positive experience with the real estate agent would most influence their decision to recommend the agent to a friend or family member.
Adding up the survey results paints a picture of a positive experience: leading with honesty, answering questions expertly and negotiating great deals are likely to make clients want to share their agent’s name with anyone they know who is searching for a home.
Overview
The NAR settlement could catalyze change across the real estate business, putting new power—and new burden—in the hands of home buyers. But these survey responses seem to demonstrate that certain principles of real estate still hold strong:
- When seeking a real estate agent, buyers and sellers gravitate toward agents who are trustworthy and will tell it to them straight—the good and the bad.
- Buyers and sellers place monetary value on the expertise and negotiation skills a real estate agent brings to the table, therefore agents should tout those skills to gain and nurture clientele.
- Buyers and sellers don’t know everything there is to know about buying and selling—which is why many might prefer to rely on a real estate agent to tell them the ins and outs. (When it comes to new rules surrounding agent pay, agents will probably need to provide simple and clear explanations for clients and create suggested pricing tiers for buyers to look over.)
- If buyers or sellers had a great experience with an agent, they’re much more likely to share their experience with loved ones—and encourage them to use the same agent.
The rules of real estate are changing, but agents can adapt to these changes while promoting the value they bring to the table for buyers and sellers. Agents who work with Newrez can tap into a robust suite of mortgage products, including a range of conventional and non-qualified mortgage (QM) loans, enabling agents to assist buyers across a wide variety of circumstances.
Meanwhile, it’s in the best interest of both buyers and sellers to get educated on the ramifications of the NAR settlement. Knowing the options for negotiating a contract with a real estate agent may enable clients to save money and tailor their experience when buying or selling a home.
The National Association of Realtors® is a registered trademark of the National Association of Realtors® and is not affiliated with Newrez.
1 Source: How the real estate settlement changes buying and selling a home : NPR
2,5,7,13 Source: Real Estate Industry Settlement Has Experts Mixed On Predictions For Home Buyers – Forbes Advisor
4,6,11 Source: NAR Settlement FAQs (NAR)
8 Source: Top 10 Qualities of a Good Real Estate Agent | Redfin
9,15 Source: What the Big Realtor®s Settlement Means for Home Buyers and Sellers - NerdWallet
10 Source: The Truth About the NAR Settlement Agreement (NAR)
3,12,14 Source: What the Realtor® Lawsuit Settlement Means for Homebuyers and Sellers | Real Estate | U.S. News (usnews.com)
