The Sky Isn’t Falling. Will the NAR Settlement Affect the Loan Process?
When news broke about the National Association of Realtors (NAR) settlement, many homebuyers and sellers felt a ripple of uncertainty. Would this shake up the market? Would loans be harder to secure? The reality is, while this settlement may lead to some changes, the core process of securing a loan remains largely unaffected.
What is the NAR Settlement?
In 2019, a group of home sellers in Missouri filed a class-action lawsuit against the National Association of Realtors (NAR), accusing the organization of antitrust violations and claiming that its practices led to inflated commission rates. Last October, a jury ruled in favor of the plaintiffs, resulting in a nearly $1.8 billion verdict against NAR, which represents around 1.5 million real estate professionals.
To resolve this lawsuit, along with several other similar cases, NAR denied any wrongdoing but agreed to pay $418 million to home sellers affected in recent years. Additionally, NAR has agreed to implement two significant rule changes:
When agents list homes on Multiple Listing Services (MLS) databases, they will no longer be allowed to include the buyer agent’s compensation.
Homebuyers will now have the ability to negotiate their own agents' compensation and formalize these terms in a signed contract.
The NAR Settlement: What You Need to Know
The $418 Million NAR settlement primarily addresses issues around commissions and transparency in the real estate market. It’s designed to ensure that homebuyers and sellers have a clearer understanding of the costs involved in a transaction, particularly who is responsible for paying commissions. While this might lead to adjustments in how real estate deals are negotiated, it doesn’t directly impact the loan process.
The Loan Process: Unchanged Fundamentals
Here’s the good news: the fundamental steps to securing a mortgage haven’t changed. The NAR settlement doesn’t alter credit requirements, down payment thresholds, or the underwriting process. If you’re a potential homebuyer, your focus should remain on your financial health—credit score, debt-to-income ratio, and savings for a down payment.
The Importance of Working With a Mortgage & Real Estate Professional
In light of the settlement, it’s more important than ever to have a seasoned mortgage professional review your contracts. While the loan process itself remains stable, the terms of real estate deals might become more complex as the industry adjusts to these new transparency requirements. A mortgage professional can help you navigate these changes, ensuring that the terms of your contract align with your financial goals.
Unpopular Opinion: Not Everyone Should Own a Home
Here’s an unpopular opinion: not everyone is ready to own a home, and that’s okay. Homeownership is a significant financial commitment, and if you’re not prepared to invest both financially and emotionally, it might not be the right time for you. The NAR settlement underscores the importance of understanding the true costs of a real estate transaction. If you’re not willing to pay what you feel is valuable, then you might need to reassess your priorities.
Don’t Panic: The Market Will Adapt
It’s easy to get caught up in the headlines, but the sky isn’t falling. The real estate market has always adapted to change, and this time will be no different. The NAR settlement might bring about shifts in how transactions are conducted, but it won’t bring the market to a halt. My advice? Stay informed, work with professionals who can guide you, and make decisions based on your financial readiness, not fear.
While the NAR settlement may introduce some changes in the real estate landscape, it won’t drastically alter the loan process. The most important thing is to work with trusted professionals who can help you navigate these changes and make informed decisions. Remember, homeownership is a journey, and it’s okay to take your time to ensure you’re fully prepared. Feel free to reach out to Brizzi Financial with any questions.