NAR Changes Impact Lending

by Corcoran McEnearney

For those following the news, many consumers are aware that the National Association of Realtors® (NAR) entered into a settlement agreement with plaintiffs in a lawsuit over how Realtors® are paid. The settlement effectively ended the common practice of home buyer’s agents automatically being paid a cooperating brokerage fee from the amount the seller agreed to pay their listing brokerage. Under new NAR rules, a buyer may now negotiate with a seller to have the seller pay the buyer agency fees, or the buyer may pay the buyer agency fee directly to their agent, or negotiate a combination of the two.

Time will tell what the overall impact of the new compensation practices will be on buyers and sellers, but we do know that some buyers will now be saddled with higher cash requirements for their transactions. Prior to the NAR settlement, the buyer’s agency fee would have been paid by the seller. Although it was always the case, the seller can choose not to cover those fees and the buyer can expect to be responsible for that additional expense.

Traditionally, the total fee to list a property for sale was typically split between the listing brokerage and the buyer’s brokerage. And note that as home sale prices have increased, the percentage of brokerage fees on average have decreased. Now, at whatever level, the fee may now be an additional cost that requires the buyer to bring additional cash to closing.

How will these changes affect a buyer’s purchase power? In July 2024, the median sales price for a single-family home in the Washington Metropolitan Service Area (MSA) was $652,600. A 5% down payment for a first-time homebuyer would be $32,630. Closing costs would be approximately $16,654. The cash outlay by the borrower would total $49,284. If the buyer must now cover the cost of, for example, a 2.5% buyer agency fee, the total cash outlay for the purchase would increase by $16,315 to $65,599. That is a 33% increase in the total cash required. Some potential purchasers will not be able to cover that additional expense.

Again, time will tell how the new compensation practices affect buyers and sellers overall. In the meantime, Realtors®, lenders, and other real estate professionals are working together to ensure buyers and sellers continue to receive clear, accurate, and informed guidance throughout their transactions. Please reach out to me or my colleagues at Atlantic Coast Mortgage to have a conversation about your real estate goals and the best way to achieve them.

Brian Bonnet - Atlantic Coast Mortgage

Brian Bonnet

SVP, Sr. Loan Officer, NMLS: 224811

Atlantic Coast Mortgage, NMLS: 643114

O: (703) 766-6702 | M: (703) 304-0188

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