Reaction to NAR Sitzer/Burnett Settlement

This moment signifies a pivotal moment in residential real estate, as the landscape of buyer commissions undergoes significant transformation following the March 2024 NAR Sitzer/Burnett settlement. The essence of the settlement mandates the implementation of Buyer Representation Agreements, which must include the following provisions:

• Commissions are fully negotiable and not set by law.
• The commission amount to be received by the buyer’s agent/brokerage must be articulated by a percentage of sales price – or dollar amount – and cannot be open ended.
• A provision with the maximum amount the buyer broker/agent will receive to be the amount agreed to with the buyer.

As you might expect, this change is generating considerable discussion. Two prevalent themes have emerged:

1. The “It Won’t Affect Us” Mindset: Some agents believe that the new ruling will have little impact on their business, particularly in the luxury and ultra-luxury markets. While this perspective may hold true for high-net-worth individuals who can comfortably cover agent commissions, it overlooks the challenges faced by buyers stretching their finances for down payments. For these buyers, the additional burden of covering agent commissions could be prohibitive and deter them from making an offer on a property where such responsibilities fall to them. Although agents focused on cash or affluent buyers may find this ruling less consequential, early feedback suggests that most buyers are concerned about the potential shift in commission responsibility and its impact on their buying power and purchasing decisions.

2. The “Getting Ahead of the Curve” Mindset: For agents at NAR-member brokerages, there has likely been involvement in sales meetings to review new paperwork, training on communicating these changes to buyers and sellers and role-playing with colleagues. Historically, commissions have always been a factor in real estate transactions, as sellers evaluate offers based on their net proceeds after accounting for transaction expenses, including commissions. The primary change under the new ruling has been the introduction of required buyer forms to be signed before showing a property outlining the buyer’s responsibility for paying the commission. Naturally, it has been simpler for sellers to cover commissions from the proceeds of a sale rather than for buyers to shoulder this cost. I value the conversations I’ve had with fellow agents and the resources provided by my brokerage, Compass, which are helping our team navigate this transition smoothly and support our clients effectively.

Every industry experiences inflection points that redefine its landscape, and the recent change in buyer commission could well serve as such a moment for many residential real estate markets. Much like the shifts prompted by the 2008 subprime crisis, those agents who are agile, proactive and prepared to guide buyers through this transition will be best positioned to thrive.