The recent National Association of Realtors (NAR) settlement has caused quite a stir in the real estate world, leading to significant changes in how agent commissions are handled. But before you start worrying about what this means for your wallet, let’s break it down in simple terms.

The Basics Haven’t Changed: First things first—despite the noise around the settlement, the fundamental rules about seller credits haven’t changed. The maximum seller credit guidelines set by agencies like Fannie Mae, Freddie Mac, FHA, and VA remain the same. This is crucial because it means that, even under the new rules, sellers can still contribute to closing costs within the established limits.

How Commissions Are Handled: Now, if a seller decides to cover the buyer’s agent commission, it would be listed as exactly that—a commission payment. It wouldn’t appear as a concession to the buyer for closing costs; instead, it would be treated as an agent commission, just like we’ve always done. This helps keep the process straightforward and avoids confusion about what’s being paid for and how.

Negotiating Broker Compensation: Here’s where things get interesting. Offers can now include a request for the seller to contribute to the buyer’s agent’s commission as part of the terms of the offer. But what if the seller doesn’t want to play ball? Buyers can simply choose not to write the offer or avoid going into escrow if the seller isn’t willing to contribute to the buyer’s agent commission.

Transparency and No Surprises: The beauty of this new structure is the transparency it brings. Buyers can enter into escrow fully aware of what to expect in terms of closing costs and total cash out of pocket. There are no surprises because the listing and selling agents will communicate these details clearly before any offer is made. It’s all about making sure everyone is on the same page before moving forward.

Why It Benefits Sellers to Encourage Buyer Representation: It’s also important for sellers to understand the value of encouraging buyers to have their own representation. When buyers are represented by an agent, the transaction is often smoother and more efficient. Buyer’s agents handle negotiations, paperwork, and ensure that all legal aspects are properly addressed, which reduces the risk of the deal falling through due to misunderstandings or missed details. Additionally, a well-represented buyer is less likely to face unexpected hurdles during the transaction, which can lead to quicker and more secure closings. This can be a significant advantage for sellers looking to finalize a sale without unnecessary delays.

Leveraging Loan Strategies to Reduce Costs: One of the most powerful tools buyers have at their disposal in this new landscape is their loan strategy. By working closely with a knowledgeable lender, buyers can explore options like lender credits or using seller credits effectively. These strategies can significantly reduce out-of-pocket expenses at closing. For instance, lender credits can be applied to cover some of the closing costs, or even the buyer’s agent’s commission, depending on the loan structure. This approach not only eases the financial burden on the buyer but also makes the offer more attractive to the seller by reducing the cash needed to close the deal. In a competitive market, understanding and utilizing these loan strategies can be the key to a successful transaction.

Put simply: The recent changes don’t have to complicate your home buying or selling experience. With the right guidance and clear communication between agents and lenders, buyers and sellers can navigate this new landscape confidently, knowing that the process is as transparent and predictable as ever.

Chenine Lozano, Mortgage Broker
W: (562) 620-7662
C: 562-762-7511
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