The NAR Settlement One Year Later: Here's Why Commissions Are Not Down and Realtors Are Not Out
As featured in Inman News.
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| AI-generated image: The NAR settlement didn't make Realtors down and out. It proved their worth. |
Many expected commissions to fall after the 2024 NAR commission settlement, but data shows that average rates have actually ticked up slightly. Why?
“True To It, Not New To It.”
The short answer is that many real estate pros have been upfront and transparent about their commissions long before this lawsuit or settlement. Personally, from my time as a sales agent to now coaching real estate agents, brokers, and firms and teaching MBA graduate students, I find it’s rare to have clients who don’t have questions about every financial detail. As most of us know, buying, selling, or even leasing a home is one of the most expensive transactions we'll ever face. It’s also not an everyday, quickly processed event. Transactions often take three weeks or more to close, which means there is plenty of time to discuss the financials, including commission.
This speaks to a key point: while there may be unscrupulous actors in real estate (as in any industry), this one-year data highlights how many practitioners likely already had ethical and transparent commission processes in place. In other words, borrowing from the hip-hop lyricist Moneybagg Yo, we’re “true to it, not new to it.”
The Law of the Land
This level of transparency isn't a new requirement in many states and locales. For example, here in Georgia, we have had to make these disclosures via buyer brokerage agreements since 1994 (31 years)! This again shows that a lack of commission transparency was not a widespread plague, but rather a localized issue. In places where disclosure and transparency were already the law of the land, very little has changed. It has simply been a reminder for practitioners to proactively follow these long-standing practices and not get lax.
Moreover, in real estate, we are acutely aware of the economy's cyclical nature, be it feast or famine. Practitioners who rely on this career as their primary income and offer a full array of services didn’t blink at the settlement’s requirement for transparency, nor did they assume such disclosures would discount their hard-earned commission. It stands to reason that the only time fees need to be reduced due to disclosure is when the pro has been hiding something. Perhaps the public expected a “gotcha” moment, but for many of us, being open, honest, and willing to negotiate has always been our standard practice—and often a requirement of local real estate commission rules. Therefore, the latest rules on transparency wouldn't cause commissions to be lowered for those who have always operated this way.
Coach’s Corner: This is Real Work
For the agents I coach, they are encouraged not only to know the value they bring to the closing table but to quantify it for clients at their first meeting with a method I call TAP into Your Value. TAP is a core, tried-and-true coaching strategy I have been successfully working with agents around the globe, whether individually or as a full workshop, for more than a decade now (success meaning these agents from ATL to Nebraska to Singapore who apply TAP command 10%+ commission rates for “regular” lisings).
T stands for Tasks: Agents list every single task they do, whether working with a seller or buyer. Those with whom I’ve worked around the nation who justify listing commission rates of 10-12%+ can often list 200 to 500 tasks they handle for their clients. Translation: this is REAL work despite TV shows that reduce the weeks of work of real estate agents and brokers to 22 minutes.
A stands for Agenda: This is the time it takes to complete each task.
P stands for Price: This is the market, or “going”, rate to complete that task by a typical homebuying/selling novice, especially without the resources, connections, and discounts available to practitioners.
For a simple example of TAP, a task might be verifying a property’s legal address at the offer stage (you don’t want to make an offer on the wrong home!). For a practitioner with partnerships or retainers with real estate attorneys, this might take five minutes. For the average consumer who’s never had to do this, it could take hours to locate on a government website, or even days if they outsource it to an attorney, with all the back-and-forth. Depending on negotiations, this information may come separately from the actual closing office (read: a separate cost), as the legal address is needed just to start the process. The cost of this single task could range from free (if you do it yourself using public government resources) to several hundred dollars based on a lawyer’s hourly rates (if you do not find a flat fee service first, since the clock is ticking on how many due diligence days have been negotiated).
Note: that was just one task on a list of 200-500 tasks! It quickly becomes evident to clients who view the TAP that this is a full-time job beyond simply opening a door, for which the practitioner should be paid accordingly.
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TL;DR: The NAR settlement didn't make Realtors down and out. Instead, it proved their worth.
Ultimately, this lawsuit was alarming not because it would decrease pay for dedicated real estate practitioners, but because it risked making an already difficult housing market even more out of reach for first-time homebuyers, who have been notably financially taxed to the point where the median first-time homebuyer age is currently higher than ever in US history.
Dr. Lee Davenport is an MBA graduate school professor, real estate coach, and author (including of Be a Fair Housing D.E.C.O.D.E.R., How to Profit with Your Personality, and over 270 news bylines). Dr. Lee trains and empowers business students, executives and real estate professionals around the globe on how to work smarter with their unique personalities and how to “advocate, not alienate,” so everyone has access and opportunity in real estate and business.
Sound off - I would love to hear from you! Give me a shout on Instagram and YouTube. Here's to your success! #LearnWithDrLee
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