Here’s How Realtors Can Win in the Wake Of The NAR Settlement

Imagine going into a job interview and not knowing what your salary will be.

As real estate agents, we're in a similar situation following the National Association of Realtors settlement (NAR).

As you probably know by now, August 17th marked the start of realtors being unable to advertise their commission fees in the Multiple Listing Service (MLS).

As a buyer's agent, you might not know your payment amount until the listing agent reveals it or you negotiate it beforehand.

"This new ruling will certainly weed out agents who now have to go the extra mile to call each listing agent regarding their compensation," RE/MAX and Keller Williams realtor Mary Huber told PropertyRadar. 

Before the settlement, sellers usually paid an industry-standard commission of 5% to 6%, and MLS listings disclosed the fee and how it was divided between agents.

The mandatory MLS policy changes that.  

"Agents are working closely with their brokers to prepare the new documentation that will soon be required," Huber said. 

The ruling states that agents must have a signed contract, usually a buyer's agency agreement, to represent a buyer.

Keep in mind that the agreement needs to be signed before any home tours can happen.

"No one likes the idea of having to have [a] buyer sign [an] agreement, but we hope it's not really a big deal," Pam Svec from Swept Away Realty told PropertyRadar. 

Svec is uncertain how or if the commission process will be communicated to realtors.

"These are things that will have to get ironed out later," she added. 

Clarity In Buyer Agent Compensation Is The New Norm

The agreement between the buyer and broker needs to spell out exactly how much the agent will get paid. It can't leave things open-ended with phrases like 'whatever the seller offers.' 

In the past, some contracts didn't specify how agents would be paid, using vague phrases like the one above.

But now, it's crucial to outline payment terms in contracts clearly.

"Buyer agents spend a lot of time researching a property before they send it to a buyer," mortgage broker Matt Odom told PropertyRadar. "If the realtor notices a low commission, like 1%, the realtor is likely to pass on sending it to their client."

Why? Because they'll be walking away with less than other properties may offer. In an ultra-competitive market, the bottom line matters.

"Homes with low commissions will sell slower," Odom added. "Realtors are adapting to the new [mandate] rules by selling the homes with better commissions.  

"The opposite can work as well," Odom said. "If a home is not selling, rather than lowering the sales price, a good marketing strategy is to raise the buyer's agent comp to 4%."

Increasing the buyer's agent commission motivates them to market your home more actively, which can attract more buyers and lead to a quicker sale at a higher price. 

By using this approach, sellers can attract more attention to their properties, especially those facing difficulties in selling. 

This proactive technique also helps maintain the relevance of real estate agents in the buying process. 

"We're helping buyers [to not] shy away from wanting to use an agent and [represent themselves] – that could be a real problem," Svec with Swept Away Realty said. 

Buyers without agents might miss market expertise, overlook important details, negotiate poorly, lack access to resources, and face potential legal issues.

Breaking Down Post-NAR Settlement Buyer Agent Compensation

In October 2023, a federal jury found the NAR guilty of increasing commissions artificially.

In March of the following year, the NAR settled a $418 million agreement to resolve the debate over inflated commissions.

This decision came from an antitrust lawsuit filed by Missouri home sellers in 2019.

They claimed that requiring sellers to pay commissions for both their agent and the buyer's agent violated antitrust laws. They also said that setting a standard commission rate of 5-6% across the country broke the law.

The NAR settlement will change that. Come August 17, who will pay for the buyer agent's salary will vary.

Read on to learn who might pay the buyer agent's commission now that sellers are no longer responsible.

Flat Fee Paid by Home Buyers Directly

With a fixed-fee commission, buyers pay a set amount directly to their broker for their services, similar to a flat rate. 

"Basically, agents who are asked to show a home where the seller is not compensating the buyer's agent, will have to reach out to the buyer," Huber said. "Personally, I could not justify asking a buyer for my commission."

Concession from the Seller

Think of it this way: when sellers offer a concession, it's like adding a bonus to the negotiation.

For example, they might agree to contribute toward the buyer's broker fee as part of the property sale.

It's a win-win situation that can help grease the wheels of the negotiation process and make the sale smoother for everyone involved.

Portion of the Listing Broker's Compensation

When the property is sold, the buyer's broker gets a piece of the commission the listing broker receives. 

This reflects the buyer's broker's role in the transaction — they played a part in making the sale happen, so they receive a share of the earnings.

Adjustments in Home Pricing

Some sellers might add the buyer broker's commission to the home's purchase price to cover the additional cost.  

This practice will need careful handling to ensure it does not adversely affect appraisals and overall affordability.

"The problem for me is what does this do for the appraisal?" Huber said. "Saying this has and will cause havoc in the industry is an understatement."

If industry shake-ups disrupt the norm, it could throw property appraisals off-kilter, messing with the accuracy we rely on to seal deals smoothly. 

This uncertainty might mean trouble setting fair prices, impacting buyers and sellers.

That's why realtors must stay in the loop to protect their clients and transactions.

Compensation Remains Open to Negotiation

Flexibility rules the game! The amount and terms of payment for the buyer broker's services can be negotiated between the broker and their clients. 

This ensures fairness and keeps things crystal clear throughout the transaction journey.

Remember that under the ruling, buyers and sellers can still negotiate and discuss compensation options directly with real estate professionals, even if the property isn't listed on the MLS.

"I think the [settlement] response is a reactionary one," Odom said. "When salespeople see a low commission, they avoid selling that product."

Finding Off Market Sellers Is The Best Way You Can Win Post-NAR Settlement

In the fast-paced world of real estate, staying ahead is critical to success.

With the recent NAR commission changes shaking up the industry, real estate agents need to pivot and adapt now more than ever. 

Targeted lead generation lists are your secret weapon for finding clients ready to seal the deal. 

Regardless of how you're paid, as a real estate professional, staying adaptable and alert is crucial.

Embracing change and focusing on leads guarantee agents succeed, no matter the circumstances.

Once you've nailed down your lead lists, the following steps are to boost your outbound marketing, optimize your digital presence, and use integrations and automations.

But first things first, let's talk about specific strategies to help you generate leads effectively.

Targeted Lead Generation Lists

Hyperlocal lead generation is your ticket to skyrocketing real estate success, especially with the looming commission changes. 

By zeroing in on specific neighborhoods and niche markets, you connect directly with motivated buyers and sellers ready to move.

This approach reduces wasted time and resources, leading to more closed deals. 

Unlocking the power of hyperlocal lead generation leads to T.O.R.N. Communication — Tailored, Opportune, Relevant, and Niche-specific messaging that hits the mark.

With precise targeting, you can craft messages that resonate and drive engagement and conversions. 

Invest in hyperlocal strategies to stay ahead of the curve and thrive in the evolving market.

Looking to adapt your approach in light of NAR commission changes?

We're here to help. 

We've compiled a list of targeted segments to focus on when seeking your next mortgage leads:

• High-Interest Mortgage Holders: Help homeowners with loans that have high interest rates (5.5% or more) and are 1-3 years old. They might want to refinance for relief.
• Refinance Candidates with Equity: Look for homeowners with older loans, good equity (at least 30%), and high rates (5% or more). They might want to improve their loan terms. 
• Education Expense Management: Help families with high school kids facing rising college costs. They might need refinancing or home equity loans to manage expenses. 
• High-Interest Conventional Loan Holders: Look for homeowners with conventional loans that are 2-4 years old and have rates above 5%. They might benefit from refinancing or selling. 
• Adjustable-Rate Mortgage Holders: Help homeowners with adjustable-rate mortgages whose rates will increase (within 6 months) above 4.75%. They might need urgent help to avoid higher payments. 

Ready to dive into more lead lists? Keep reading for additional segments to target and discover your roadmap to mortgage business growth.

Seeking effective ways to pinpoint and monitor these segments? Look no further than cutting-edge, data-powered platforms like PropertyRadar.

Using important public records and local market insights, you can easily adjust filters and criteria to target potential customers, allowing for personalized outreach.

Eager to learn more? Stay tuned for the top 10 reasons why PropertyRadar should be your next lead generation powerhouse.

Outbound Marketing Strategies

Now that you've nailed down your target segments, it's time to kick off your outbound marketing strategies.

In the wake of the recent NAR ruling, realtors seek reliable avenues to stand out in a competitive market. That's where outbound marketing strategies come into play. 

• Direct Mail Campaigns: Send personalized postcards or letters to homeowners in your target areas. Highlight your expertise and recent successful transactions to build credibility and attract interest.
• Cold Calling: Although it may seem old-fashioned, it can still be effective. Prepare a script that focuses on the benefits you offer and tailor your approach based on the prospective client's needs.
• Networking Events: Attend local community events, real estate seminars, and industry conferences. Building relationships in person can lead to referrals and new business opportunities.

Online Presence and Digital Outreach

Realtors need surefire ways to shine in a competitive market following the NAR settlement. 

The secret? Boosting your online presence and mastering digital outreach.

Social Media Advertising: Use platforms like Facebook and Instagram to run targeted ads. Highlight unique properties, success stories, and client testimonials to attract potential buyers and sellers.

Email Marketing: Create a monthly newsletter with market updates, tips for buyers and sellers, and featured listings. This will keep you top-of-mind with potential clients and establish you as a knowledgeable resource.

Leveraging Integrations and Automations

Finally, step four is to harness integrations and automation to secure clients and stay ahead of the competition. 

They are crucial in streamlining your processes, saving time, and ensuring you never miss a lead. By automating repetitive tasks and integrating your tools, you can focus more on building relationships and closing deals. 

The best part? PropertyRadar offers 5,000+ integrations! 

Adapting to NAR Commission Changes

Wondering what other avenues you can take to generate leads and stand out within your community?

Rest assured, we've got you covered.

Adapting to the NAR commission changes is a game-changer. By staying flexible and embracing these shifts, you can tailor your strategies to meet the evolving market needs. 

This proactive approach helps you attract more clients and positions you as a forward-thinking realtor who's always a step ahead. 

Embrace the change, and watch your business thrive!

Transparent Communication: Clearly explain the new NAR commission structures to your clients. Transparency builds trust and helps clients understand the value you provide.

Competitive Pricing Strategies: Advise sellers on pricing strategies that account for buyer agent commissions without inflating the purchase price. This helps avoid potential appraisal issues and keeps transactions smooth.

Stay ahead of the curve in light of the recent NAR commission changes. Check out our guide to growing your home and property service business for your first steps.

The Future of Buyer-Seller Relationships Is Uncertain

It's uncertain if the NAR settlement will stop buyer and seller cooperation.

With the proposed agreement, sellers might still be able to give money to buyers to pay their agents. 

Think of it like fixing a leaky roof before selling a house. Just as a seller might disclose that issue, they can also mention that the buyer will likely need to pay their agent a certain percentage for selling the house — and agree to cover that cost in private notes to agents.

Despite the settlement's terms allowing cooperation, how it's perceived might still influence how agents and consumers view teamwork and fees.

This could result in less collaboration among agents on fees, though not entirely stopping it.

According to a December 2023 survey conducted by Redfin, 51% of real estate agents indicated that discontinuing cooperation would result in lower fees for buyers' agents.

Buyers' Agents' Fees will Continue to Decrease

We've seen that when clients directly pay their agents, they're more cautious about fees. 

Redfin believes that competition has already reduced the fees sellers' agents can charge.

If buyers look for agents with lower fees, those agents will feel more pressure to cut their prices than the agents who list homes.

Imagine shopping for groceries: if one store lowers its prices, other stores have to compete by lowering their prices.

The same thing happens with real estate agents. 

If buyers choose agents with lower fees, other agents will lower their prices to stay competitive.

This keeps costs down, making buying homes easier without spending too much on agent fees. 

Plus, with lower fees, buyers will have more money for other home-related expenses.

More Listing Agents will Sell Homes Directly to Buyers

In places like Maryland and California, Redfin agents are noticing more listings that don't offer a commission to the buyer's agent. 

Sellers can save money on commissions by paying only one agent instead of two, even if the listing agent earns more. 

This practice is already common with newly built homes, where, according to Redfin, about 30% of buyers work directly with a salesperson from the builder. 

Due to the ongoing shortage of homes for sale in the U.S., this trend will likely continue even without a settlement.

Buyer's Agents will Require Clients to Sign a Contract

This is already required by law in Washington state, and it's being considered in California. 

These contracts, called buyer's agency agreements, can determine upfront how much the agent will be paid if the listing doesn't offer payment. 

However, the settlement seems to go further by asking consumers to sign the agreement before touring with the agent. 

Buyers should be able to see agents in action before deciding which one to hire, just like homeowners don't sign listing agreements before getting advice from agents on pricing and marketing.

​​More Homes will be Marketed Outside the MLS

More homes may be advertised outside the MLS, making it more difficult for buyers to see all their options. 

This matters because it impacts buyers' choices and could increase private deals, benefiting some over others. 

The MLS helps agents show potential earnings for buyer's agents, keeping the housing market transparent. Not understanding its importance could harm fairness in housing deals.

As the real estate landscape changes with more competition and potentially lower fees, generating your own leads is more critical than ever. 

Establishing a robust lead generation machine ensures you stay ahead and thrive amidst industry shifts. 

PropertyRadar is your go-to solution, offering powerful tools to identify, connect with, and convert potential clients. 

Don't leave your success to chance — use PropertyRadar to build a steady stream of leads and secure your place in the market.

Get a free PropertyRadar trial and unlock the power of 150 million properties to find your next leads today.