The Recent NAR Settlement: Lessons from Paris and Silicon Valley

As a seasoned real estate advisor with practices in both Paris, France and Silicon Valley, California, I’ve had the unique opportunity to navigate two highly competitive yet distinctly different real estate markets. The recent settlement involving the National Association of Realtors (NAR) in the United States has brought to light a crucial aspect of our profession that we in Paris have long been familiar with: the need to clearly articulate our value to our buyer clients.

In Paris, where I have practiced for over 20 years, we have always operated without a Multiple Listing Service (MLS). This means no central database of listings, no shared commissions, and limited cooperation between agents. Buyer’s agent compensation tied to the listing price has never been the norm here, so we’ve always had to demonstrate our worth to potential clients explicitly. This has fostered a culture of transparency and client-focused service that benefits both agents and homebuyers. 

When I first moved to Paris in 2003, buying a home felt like navigating the Wild West. My personal experience – spending 10 months dealing with 13 agencies, visiting 44 homes, and ultimately finding a property 20% over my budget that included a 6% commission to the listing agent – led me to pioneer a real estate search business. My goal was to help other buyers avoid similar frustrations. Over the years, my fluency in French has been instrumental in navigating local market nuances and guiding foreign buyers through the cultural, legal, language and structural differences that might otherwise be overwhelming.

Contrastingly, in Silicon Valley, where I work at @Compass agent serving clients buying and selling multi-million dollar homes, we’ve long enjoyed the benefits of a comprehensive MLS and a culture of cooperation among real estate professionals. The tech boom and resulting real estate appetite have created a market where homes often sell within days, sometimes hours, of listing. In this environment, the value of a well-connected, experienced buyer’s advisor cannot be overstated.

The NAR settlement is set to change the landscape dramatically. Key changes include decoupling buyer advisor commissions from listing agreements, increased transparency of commissions, and the requirement for buyers to sign broker agreements before agents can show them properties. In California, these changes take effect tomorrow, marking a significant shift in how we conduct business.

While the settlement aims to increase transparency and reduce costs, we must be vigilant to ensure it doesn’t inadvertently reduce access to professional guidance for those who need it most. In Paris, the norm is for buyers to work on their own, navigating multiple websites and sources for properties, along with the financial, strategic, legal, and community aspects of a home purchase. With the average American homeowner having 64% of their net worth tied up in their primary residence, ensuring buyers have access to expert guidance is crucial. 

The settlement could inadvertently push the U.S. market towards other challenges. If buyer agent commissions are excluded from the purchase price, the buyers’ commission of 2-3 percent will not be part of the mortgaged amount, necessitating buyers to come up with an additional 2-3% of the purchase price in cash on top of their down payment. This could particularly impact first-time and low-income homebuyers, potentially forcing them to forgo representation altogether.

But this moment also presents an opportunity. As real estate professionals, we must clearly articulate our value proposition, in particular the crucial advice and support we provide throughout the complex homebuying process. As we navigate this new landscape, we must focus on maintaining transparency, enhancing our professional services, and ensuring that the dream of homeownership remains accessible to all. It’s not just about adapting to new rules; it’s about elevating our profession and the service we provide to our clients.

The real estate markets in Paris and Silicon Valley are oceans apart, but the core principles of client service, expertise, and market knowledge are universal. Let’s use this moment of change to reinforce these principles and strengthen our industry for the future. Our clients deserve nothing less.

Miranda Junowicz is the founder of Paris Property Group, and a Global Real Estate Advisor with Compass in Palo Alto, California.