Harnessing the NAR Settlement: How New Construction Builders Can Leverage Tech to Cut Out the Buyer-Agent Middleman
Builders Have an Opportunity to Remove the Buyer-Agent Middleman
I had an interesting conversation with a builder the other day. He flew in on his private jet — suffice it to say, he was a top-30 builder selling a few thousand homes each year. This builder was keen to address the issue of spending $30 million a year on buyer-agent commissions, tired of chalking it up to “the cost of doing business.” Many buyers initially engage directly with the builder, but after the first or second consultation, they feel the need to enlist a buyer agent. The question is, why? Could the recent NAR settlement provide the tailwinds necessary to introduce buyer-facing technology that improves their experience and facilitates more direct transactions?
The Digital Co-Pilot Solution
Builders like this are now considering how the recent National Association of Realtors (NAR) settlement creates a timely opportunity to facilitate direct transactions with buyers. As a licensed real estate agent in four states and someone working in digital product design, I have some insights into how a conversational platform with AI integration can eliminate the friction points in the buyer’s journey.
My team mocked-up a conceptual digital co-pilot. A conversational platform that could provide buyers with a seamless and convenient buying experience that also sits right on top of the builder’s CRM.
The Power of Mobile-First, Self-Service Technology
Mobile-first, self-service technology enhances Customer Experience (CX) across all industries. Hundreds of Chief Experience Officer (CXO) roles and digital experience positions outside the C-suite now exist, yet builders have not invested significantly in this space. They stand to benefit immensely by offering a Carvana-like experience to their customers. Builders who recognize that Realtors are not a sales channel, but rather gatekeepers, will be the first to adopt such technology.
NAR Settlement: A Catalyst for Change
With the recent NAR settlement, buyers are becoming more deliberate about considering commission costs. NAR owns the vast majority of Multiple Listing Services (MLS) across the country. Per the settlement, MLS’s are now prohibited from advertising predetermined buyer-agent commissions. Consequently, buyer agents present clients with lengthy contracts stipulating that buyers are responsible for their Realtor’s 2.5% or 3% commission if they purchase from a seller who isn’t offering one.
Questioning the Necessity of Buyer Agents
Buyers are increasingly questioning the motives, integrity, and transparency of Realtors. This skepticism creates an opportunity for builders to provide transparent, cost-effective solutions for the home-buying process via a digital co-pilot that caters to these evolving preferences and facilitates direct transactions.
Increasing Non-Commission Sales
Direct transactions can significantly reduce costs for builders and provide a streamlined process for buyers. According to the U.S. Census Bureau, 664,000 new single-family houses were sold in 2023, with an average sales price of $524,800. Builders paid around $10 billion in commissions last year. Eliminating realtor fees would allow builders to offer better deals, incentives, terms, upgrades, and bonuses to buyers.
Digital Engagements to Solve Buyer Friction Points
Builders often operate in a siloed manner, lacking essential tools (no pun intended) such as Know Your Customer (KYC) data, buyer-journey maps, customer survey data, and robust digital strategy departments who make good use of it all.
This results in various points of friction throughout the buyer’s journey, such as phone calls going to voicemail, uncertainty about the value of lot premiums, sales reps who may not seem fully transparent or trustworthy, difficulty getting answers or scheduling walk-throughs.
The critical “moment of truth” occurs when the buyer decides they need a second opinion or need outside support. Understanding when and why buyers who initially engage directly with the builder eventually choose to enlist an agent is crucial. Conducting interviews with past customers who made this shift can provide invaluable insights for improving service design. This feedback is essential for everything from finding quick wins, to holistically improving customer experience (CX), deploying better digital engagements, and ultimately increasing non-commission sales.
Top 5 Reasons Buyer’s Seek Outside Representation
Here are what I believe to be the top five reasons buyer’s seek outside representation, e.g., non-commission sales drivers:
- Access: Make it easy for buyers to schedule showings and access information 24/7.
- Process Knowledge: Provide detailed information about the buying process and milestones. Think, Domino's Pizza Tracker.
- Representation: Ensure buyers feel represented and supported throughout their journey.
- Deal Confidence: Help buyers feel knowledgeable and confident about their purchase decisions.
- Responsiveness to Inquiries: Enterprise-grade AI is extraordinarily sophisticated and can offer prompt responses to build trust and reduce the perceived need for an agent:
Implementing a Digital Front Door
Offering customers a digital front door — a user-friendly, accessible gateway — allows buyers to schedule tours, access information, and stay informed throughout the process. HomeUSA found that builders who simply advertised year-round open houses on Zillow saw a 6.5% increase in non-commission sales, as buyers felt comfortable showing up on their own.
Summary
Many buyers view agents as merely a means to an end. The reputation of Realtors is declining while consumer preferences for self-service and on-demand information is increasing. Builders are leaving tens of millions of dollars on the table by not capitalizing on growing skepticism about the necessity of buyer agents. There’s extraordinary ROI in investing in digital experiences that meet evolving consumer expectations, thereby reducing dependency on Realtors and increasing non-commission sales.
Although direct transacting is not yet commonplace in real estate, it soon will be. I predict that in just ten years, builders (and homeowners for that matter) will have completely eliminated the practice of offering commissions to buyer agents.
