I’m Alison Wojnarowski with the W Real Estate Group here in Raleigh NC, while I have extensive knowledge on this subject I am not an expert nor am I offering legal advice, so take this information as my understanding and opinion based on what is known today.  Alright, let’s get right into it and start with level setting ourselves with how real estate transactions are done here today.

Current Commission Structure

When a seller engages a real estate agent to sell their home, the commission has always been negotiable. The commission is paid from the seller proceeds to the listing brokerage at the time of the housing closing.   

While the commission is paid from the sellers proceeds to the listing brokerage, the listing brokerage typically agrees to split the commission with a cooperating broker that assists with the sale on the buyer side of the transaction.  Roughly half of this commission is paid by the listing firm to the buyer’s agent at the time of closing, and another portion is used to reimburse the listing firm for marketing costs, photography, open house costs, and more.  

In MLS, the database where all homes are listed for sale for agents to see, the listing agent lists the amount of commission that will be paid out to the buyer’s agent in a dedicated field.  

On the buyer’s side, North Carolina requires that all buyer’s agents have a signed agreement with their buyer prior to submitting an offer to purchase on a home.  This contract stipulates the fee owed to the buyer’s agent from the buyers themselves IF the seller and/or listing agent choose NOT to offer commission for the buyer’s agent.  

Now this is incredibly rare in North Carolina, and buyer’s rarely ever end up paying any money out of their pocket for buyer’s agent services.  But, is that actually true?

Home values are actually calculated such that the commission fees are built into the overall value.  So, when someone lists their house at fair market price, technically the true value of their house is slightly less when accounting for commission fees.  

So in actuality, buyers have indirectly been paying commission fees since the dawn of real estate agents, it’s just been baked into the listing price.

But, what this current system has done is minimized the amount of money buyers have had to bring to the closing table, and while many forget, the sellers already have these costs included in their home value.

NAR Settlement

So, what is this National Association of Realtors Settlement and what does it mean for the average buyer and seller in North Carolina?

At a high level, the lawsuit claimed that the National Association of Realtors required sellers to pay a buyer’s agent, and the sellers were not aware that they were paying the fees for the buyer’s representation from the proceeds.

In reality, buyers and sellers have always been able to negotiate these fees and sellers were never obligated to pay buyers agents.  The settlement in this case ultimately serves to make it more transparent that sellers do not HAVE to pay buyer’s agents, and that fees are negotiable.  

Do note that this settlement has not been approved by the Department of Justice yet, but if it is, the changes are to go into affect in July of 2024.  

Here are the high level details of the settlement:  

1. Buyer’s must enter into a written agreement with a buyer’s agent BEFORE showing a property, and that agreement must list out how much the buyer has agreed to compensate the buyer’s agent for their services throughout the home buying process.

2. Sellers must also enter into a written agreement with a listing agent that details out their commission, and in lieu of offering buyer’s agent commission, it must be agreed to the amount of buyer concessions, if any, that the seller is willing to pay.  These concessions can be applied to the buyer’s agent commission at closing.

3. Listing agents will not have dedicated fields in the MLS system to share what the buyer’s agent commission will be, but will be allowed to provide buyer concession amounts in the public remarks field.  Additionally, listing agents can offer buyer’s agent compensation off MLS through their own communication methods.  

So in essence, things haven’t really changed, they are just being made more convoluted.  In North Carolina, we are fortunate in that we are one of the few states that already had buyer agency agreements in place, so this settlement affects us much less than other states.  

Let’s step through the realistic impacts here in a little more detail.

Buyer’s Agency Agreements

Buyers entering into written agreements, called Buyer’s Agency Agreements, is nothing new in North Carolina, but the difference now is that Buyer’s must have them signed before any properties are shown, and buyer’s will be more mindful of the fees.  For those relying on Zillow and Realtor.com agents to quickly show you a house you found on the internet, you now have more red tape to jump through as a buyer, but I highly recommend against doing that anyways as you’re just rolling the dice with those agents.

Compensation wise, the buyer could always negotiate the fee for a buyer agent’s services, but now it could be more prevalent.  I believe you will see some agents experiment with different models involving different levels of service, flat fees, and more, but overall, the fees will generally be what they are today.  

Remember, you get what you pay for, and this will drive the good agents to be more successful, with many sub-par agents leaving the industry as buyers will demand strong service.

There also may be buyer’s who choose not to use a buyer’s agent to avoid paying fees, but that is a major risk to take for the majority of people making the largest purchase of their life.  Real estate transactions and negotiations are complicated, and having an experienced real estate agent on your side will get you the best deal, unlock off market properties, and reduce your risk overall.

But buyer’s, don’t worry too much, as this next part should ease your concerns about having to come up with more cash to close or being forced not to use an agent.

Listing Agreements

For sellers, the listing agent and seller will enter into a written agreement as normal, but there is a chance the listing fees will be less; however, that doesn’t mean the vast majority of home sellers will suddenly pay less.

As it stands today, nearly 90% of all home buyers use a real estate agent, with a large portion of the remaining 10% involving family and friend transactions.  Most buyers are simply not going to be able to afford paying a real estate agent with cash on hand, and thus the likely standard will involve seller paid concessions to the buyers to cover the buyer’s contractual obligation to the buyer’s agent, which will create a very similar bottom line for the seller as they see today.

So as a seller, this is something that you and your listing agent will discuss as far as your willingness to pay. 

If a seller chooses NOT to provide any buyer concessions, which has always been optional by the way, it is very likely their house will sit on the market longer and receive a lower offer, as buyer’s will be less incentivized to consider your house given the larger out of pocket commitment.  

Instead, it would be expected for the sales price to be lower as well since you’re not paying a buyer’s concessions.

The most likely situation for sellers who choose not to offer these concessions is the offer they receive will have in it the request for the seller to cover a certain amount of the buyer’s closing costs that will now include the amount they agreed to with the buyer’s agent.  This is obviously part of the negotiation as the seller can counter or refuse, but it will be another facet to real estate transactions.

Advertising 

And lastly, let’s talk about advertising these seller concessions to the buyer.  In all honesty, there’s not a ton of change here, as while the specific buyer’s agent commission fields in MLS will go away, the listing agent can still list what the seller is willing to pay in the public comments field.  

Also, listing agents can advertise any buyer paid commissions on a listing on their own platforms, such as via emails, newsletters, websites, social media, etc… 

So while what you’re advertising is a LITTLE different, overall, you won’t have to offer on a house without knowing whether or not the seller will help pay for the buyer’s agent fees.  

Summary

So overall, my thoughts here are that this settlement will really not change much for us here in North Carolina.  There will be some new concepts tried from buyer’s agents and it may take a little time to settle into what the new norms look like commission wise, but overall, I would still expect sellers to pay the vast majority of buyer’s agent fees, just the how it gets paid will be structured differently.

I’ll leave you with some advice.  Buyers, be selective on your real estate agent.  It will be important to have an experienced agent at your side who offers you both convenience and significant value.  Don’t just choose the first Zillow agent who pops up on your search, as you will pay for it later. 

Sellers, while the media has billed this settlement as a way to pay less, you will ultimately be looking at a similar bottom line as you were previously, whether you pay concessions or lower the price.  Your home selling experience will go MUCH better if you advertise the inclusion of concessions to the buyer.  Also, be selective on your real estate agent, it’ll be important that they have a great network of agents and most important, a large audience to advertise to.

We here at the W Real Estate Group are uniquely positioned for this change given our extensive social media presence and resources with Relocating to Raleigh.  We are the ONLY team in the Triangle that has any measurable and active social media presence, which for sellers has proven to allow us to get your property in front of tens of thousands of more eyes than anyone else.  And for buyers, we have the greatest collection of resources offered in the area with extensive regional knowledge that puts us in the best position to match you with the perfect location for your needs.  

I hope this blog was helpful for you to understand the high level implications of this settlement in North Carolina.  For more information on the Raleigh area, please see our blog on the best neighborhoods in Raleigh and the pros and cons of Raleigh NC.

Please reach out if you need any real estate assistance as we would love to help you!

Please reach out via our contact information below:

Phone:  919-504-5265

Email:  alison@thewgroupraleigh.com

Website:  www.thewgroupraleigh.com