How the NAR Settlement Could Affect For Sale By Owner (FSBO) Transactions

If you’re considering selling your home without a real estate agent, you’re in the right place. For Sale By Owner (FSBO) transactions have long been an appealing option for homeowners who want to save on commission fees and maintain more control over the process.

However, recent developments, particularly the National Association of Realtors (NAR) settlement, may introduce new factors to consider if you’re planning an FSBO sale. Let’s break down what this settlement means for homeowners and how it could impact your selling strategy.

What Is the NAR Settlement?

First, let’s explain the NAR settlement. The NAR has faced several lawsuits over recent years. Sellers and buyers argued that the commission structure NAR promoted was unfair, raising the cost of real estate transactions.

At the center of the controversy is “co-commission,” where sellers are often expected to cover both the listing agent’s and the buyer’s agent’s commission fees. Critics claimed this model lacked transparency, particularly for buyers who were often unaware of their agent’s payment.

The Department of Justice (DOJ) also launched an investigation, accusing NAR of violating antitrust laws. The DOJ focused on unclear commission structures, restrictions on how brokers could market properties, and unfair practices within the MLS (Multiple Listing Service).

This led to a settlement agreement that aims to change the way real estate commissions are disclosed and managed in the future.

Here’s what the settlement brings:

  • More Transparency in Commission Disclosure: Real estate agents must now clearly disclose commission rates to both buyers and sellers. Everyone involved will know exactly how much agents are getting paid.
  • Elimination of Unfair Practices: The settlement bans practices that discouraged agents from showing homes offering lower commissions. This could benefit FSBO sellers who may offer lower commissions, giving them a better chance to compete.
  • Flexibility for Sellers: Sellers now have more freedom to negotiate how much they pay the buyer’s agent, instead of being locked into paying a set percentage.

So, what does all this mean for FSBO sellers? Let’s explore that next.

How the NAR Settlement Affects FSBO Transactions

For those selling their homes without an agent, this settlement brings a mix of opportunities and challenges.

Better Clarity for FSBO Sellers

The increased transparency in commission disclosure is great news for FSBO sellers. You’ll have a clearer understanding of what buyer’s agents expect to be paid, which helps you budget better and avoid surprises. It also allows you to negotiate commission fees more confidently.

Increased Pressure from Buyer’s Agents

However, with sellers now more informed about commission structures, some buyers’ agents may push harder to secure higher payments. While FSBO transactions are often used to avoid hefty commissions, you might feel pressured to offer competitive fees to attract buyers’ agents.

If your offer seems too low, some agents may direct their clients to other homes, which could limit your pool of interested buyers.

Level Playing Field

On a positive note, the settlement promotes more market competition. In the past, some buyers’ agents were reluctant—or even outright refused—to show FSBO homes to their clients.

These new rules could change that. FSBO sellers may now find it easier to attract buyers’ agents who are more willing to work with them.

Practical Tips for FSBO Sellers

If you’re planning to sell your home without a realtor, here are a few things to keep in mind in light of the NAR settlement:

  1. Understand Local Market Conditions: Take some time to research the typical commission rates in your area. Knowing this can help you offer competitive compensation to buyer’s agents while still saving on overall costs.
  2. Consider Offering a Buyer’s Agent Commission: While it may seem counterintuitive, offering a fair commission to buyers’ agents can help you in the long run. Attracting more potential buyers could lead to a quicker sale, saving you time and hassle.
  3. Use Transparency to Build Trust: Being open about your commission structure from the start can help you build trust with both buyers and their agents. This can make negotiations smoother and less stressful.
  4. Get Legal Support: With all these changes, it’s more important than ever to consult with a real estate attorney. An attorney can help ensure that your sale follows the new rules and assist with drafting contracts that protect your interests.

Wrapping It Up

The NAR settlement may introduce some changes for FSBO sellers, but it also creates new opportunities. Increased transparency and fairer competition can benefit those selling their homes without real estate agents.

While you might face some pressure to offer competitive commissions to buyers’ agents, the freedom to negotiate and the potential to attract more agents to show your property can work in your favor.

If you’re considering selling your home FSBO, now might be a great time to take advantage of these changes. Need more tips or legal assistance? Feel free to reach out for guidance on how to make the most of your sale while keeping more of your hard-earned money in your pocket. Contact us today to learn more.