Understanding the NAR August 2024 Settlement Understanding the NAR August 2024 Settlement
Learn the facts about the new requirements for paying buyer’s agent commission during the sale of a property.
What has changed?
The new rules from the National Association of Realtors® (NAR) settlement went into place on August 17th and there are two things to note:
- Real Estate Agent Commissions are now decoupled from the MLS (multiple listing service). What this means is that the standardization of how much commission is being offered to a Buyer Agent by the Seller will no longer be defined on the MLS listing as has been customary up until this point. Buyers and their Agents will now not formally know ahead of putting in an offer if, or how much, a Seller will be willing to pay towards their Buyer Agent Commission. Who and how much each party pays will now become part of the offer and negotiated in the final terms of the purchase and sale agreement.
- Buyer Agents are now legally required to have a Buyer Agency Agreement agreed to and executed by their client ahead of showing any buyer a property in which they are acting in capacity as the Buyer’s Agent. The Buyer’s Agency Agreement will outline what services Buyer Agency provides, the commission that they charge for those services, the length of the agreement, and that the Buyer is ultimately responsible to ensure that the Agent is compensated for their services.
What is Leader Bank doing about it?
At Leader Bank we focus on staying a step ahead to create and offer timely and relevant financing options to our clients and our industry partners. These new requirements draw the Buyer Agent Commission into the purchase negotiation in a way that has not been customary in the past. Regardless of the situation, our Loan Officers and team will guide clients through their options and make sure that we help them make an informed decision that they are comfortable with.
What does this mean for home buyers?
If a Buyer Agent Commission is being paid, we expect one of the following three scenarios:
- Seller to pay the Buyer Agent Commission – Seller credits are allowed and will be excluded from Fannie Mae’s IPCs (interested party contributions). This means that the Seller’s contribution to the Buyer Agent Commission can still be issued from the proceeds of the sale to the Buyer Agent, as has was the most common practice until August 17.
- Buyer to pay the Buyer Agent Commission – The Buyer can also pay their Agent directly at closing, and that payment can come from:
- Buyer’s own funds or a gift: Buyer’s needed cash to close will include the amount for the Buyer Agent Commission, in addition to their downpayment and closing costs. The Buyer Agent Commission payment will show as a line item on the CD (Closing Disclosure). Proof and source of these funds will be validated through the underwriting process and established ahead of closing.
- Leader Bank Move and Improve Line: Leader Bank rolled out its Move and Improve Line of Credit as a way for certain clients to access their equity after closing for the purposes of paying an Agent’s commission, along with moving expenses and other expenses that arise after you purchase a home. This is set up through a triparty agreement that allows Leader Bank to directly pay the Buyer Agent Brokerage its commission within five days after closing directly from a Buyer’s Move and Improve Line funds. This is one of the many ways that Leader Bank uses its bank portfolio to differentiate itself from its competitors and offer creative solutions. See how the Move and Improve Line works here.
- Combination of both Buyer and Seller paying the Buyer Agent Commission: In many scenarios there will be a portion of the Buyer Agent Commission paid by both parties. Although each situation will be unique, the same parameters apply; Buyer or Seller can pay Buyer Agent Commission directly to the Agent and Buyers who qualify for the Move and Improve Line will have the ability to pay their agent’s commission with it.
What does this mean for your home financing process?
It’s important to note that the Buyer Agency Agreement is a contract and calls for the Buyer to be responsible for the Buyer Agent Commission. Until the purchase negotiation is finalized, the Buyer of the home is ultimately responsible to pay their agent. As a lender we MUST take this into consideration in qualifying a borrower at preapproval and throughout the underwriting process. It is very important that you share your Buyer Agency Agreement upfront and are open with your lender as to how this portion of the transaction will be handled.
For more info visit NAR website or get in touch with one of our expert Loan Officers today.
