On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.
The key details are:
- Date: March 15th, 2024
- Payment: NAR agreed to pay $418 million in damages
- Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions
This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:
Consumers:
- Potentially lower real estate commission fees as a result of increased competition between agents
- More flexibility and control for sellers in how they compensate buyer's agents
- Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price
Industry Stakeholders:
- Real estate brokerages and agents may need to adjust their business models and commission structures
- Reduced influence of NAR in setting industry standards and practices around commissions
- Potential for new business models and pricing approaches to emerge in the real estate market
Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!
Real Estate Commissions and Loan Types in Kentucky
The National Association of Realtors (NAR) recently reached a settlement that impacted real estate commissions for different mortgage loan types in Kentucky and across the United States. Here's a breakdown of how commissions can vary:
Conventional Loans
- For conventional mortgage loans, the typical real estate commission is 3-6% of the home's sale price.
- This commission is usually split evenly between the buyer's agent and the seller's agent.
- Buyer may pay their Agent's reasonable commissions or have the seller or agent constructio to the commission of the buyer agents' commission. Typical fees paid by the seller are not subject to the IPC limits. (interested party contribution)
FHA Loans
- For FHA (Federal Housing Administration) loans, the real estate commission is typically slightly lower, around 3-6% of the sale price.
- This lower commission is due to the additional requirements and paperwork involved with FHA loans.
FHA Loans-FHA allows buyer to pay commissions of their agents, or negotiate the seller's or agent contribution to commission to the buyer's agent. – If the State and Local law or custom permits this, and if the commissions and fees are reasonable in amount, the existing policy would not treat it as an IPC. (interested party contribution)
VA Loans
- For VA (Veterans Affairs) loans, the real estate commission is usually the lowest, around 3-6% of the sale price.
- VA loans have strict guidelines, and the lower commission helps offset some of the additional costs associated with these loans.
- VA Loans-Buyer may pay their agent's commission or negotiate the seller or agents contribution to commission to the buyer's agent. (interested party contribution) IPC is not mentioned. A temporary variance is permitted for the Veteran buyer to pay Buyer Broker Fees.
USDA Loans
- USDA (United States Department of Agriculture) loans, which are designed for low-income homebuyers in rural areas, also typically have a real estate commission of 3-6%.
- The lower commission helps make these loans more affordable for the homebuyers.
- USDA loans-Buyer may pay their agents commission or negotiate the seller's or agent's contribute to the commission of the buyer's agent. Real Estate Commission Fees are excluded from the 6% cap for IPC concessions
Interested Party Contributions: On April 15, Fannie Mae and Freddie Mac announced that they will not count buyer’s agent commissions as part of their allowable interested party contributions (IPCs). This is not an update to their selling guides, but a clarification on how seller-paid real estate agent fees are treated. Fannie/Freddie guidelines allow sellers to contribute 2-9% of the property value toward the borrower’s closing costs. In their announcement, Fannie and Freddie stated that “fees or costs customarily paid by the property seller according to local convention are not subject to these financing concessions limits.”
The new terms outlined in this settlement will have ripple effects that both consumers and industry stakeholders will likely experience.
The consumer impact:
Consumers may feel more pressured to finance the broker’s commission into their loan. This could negatively impact underserved, low-to moderate-income, and first-time borrowers who may not have the necessary means to fund a buyer’s commission out of pocket.
Higher mortgage costs:
Financing the buyer-broker commission into the loan poses challenges to the Section 32 points & fees test, which could lead to an increase in higher-cost mortgages and non-qualified mortgage (QM) loans.
On March 15th, 2024, the National Association of Realtors (NAR) agreed to pay $418 million in damages to settle some of their real estate commission lawsuits. The settlement prohibits NAR from requiring a seller's agent to engage in cooperative compensation with a buyer's agent.
The key details are:
- Date: March 15th, 2024
- Payment: NAR agreed to pay $418 million in damages
- Settlement terms: NAR prohibited from requiring seller's agent to cooperate with buyer's agent on commissions
This settlement is significant because the new terms will likely have ripple effects that both consumers and industry stakeholders will experience:
Consumers:
- Potentially lower real estate commission fees as a result of increased competition between agents
- More flexibility and control for sellers in how they compensate buyer's agents
- Possibility of buyers having to pay their agent's fees directly rather than them being bundled into the home price
Industry Stakeholders:
- Real estate brokerages and agents may need to adjust their business models and commission structures
- Reduced influence of NAR in setting industry standards and practices around commissions
- Potential for new business models and pricing approaches to emerge in the real estate market
Overall, this settlement represents a shift in the power dynamics of the real estate industry that could lead to more competition and consumer-friendly changes in the way real estate transactions are conducted. Let me know if you have any other questions!
Joel Lobb Mortgage Loan Officer NMLS 57916
EVO Mortgage911 Barret Ave, Louisville, KY 40204
Company NMLS ID # 173846
Text/call: 502-905-3708
email: kentuckyloan@gmail.com
http://www.
NMLS ID# 57916, (www.nmlsconsumeraccess.org).
