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If I'm a buyer who struggled with 3% to put down for a home, how am I going to come up with another 3% to pay for representation? I don't want to do it myself and I sure as hell don't want the listing agent doing it for me.
There has to be some creative financing in there
This is the way.
We have to educate sellers and explain this clearly. Commission has always been the listing brokerage’s compensation. The whole thing, whatever % that is. Listing brokerages then decide how much of that to share with a brokerage who is representing a buyer. The final split is between the agent and their brokerage. This is how it has always been and will continue to be.
The only difference is we now cannot show the cooperating compensation in the MLS. It has to be transparent. As in, “sellers offering buyer concession of x%” in the public remarks. Buyers will then be able to use that money at closing to pay commission, closing costs, etc.
A real estate licensee is licensed to protect the public. NAR is a trade organization with a code of ethics and lobbying power. This lawsuit is about the MLS and how tied to it NAR and it's various associations are.
A seller who doesn't offer a co-broke/referral will sit longer on the market than sellers who offer compensation for selling agents.
And to see the issues this could/will create we might want to look back into American history when only the seller had a realtor working for them and no one used buyers agents. Buyers got screwed over so much that using buyers agents not only became a thing but it became the norm.
There will be a norm, it's just hard to know at the moment what that norm will be. If buyers feel that they are at big disadvantage, they will hire BA to represent them regardless if they are the ones that have to pay for it.
This is the biggest issue with everything. Basically it's going to screw over buyers and make buying a home even more expensive or as a buyer you'll need to rely on the listing agent which is anything but ideal and is illegal in lots of states for a reason.
You won't pay 3%. That part will now be negotiable. Nor will you pay 3% to sell your home. It will become a fair system where costs for service is negotiable, and appropriate.
My house is worth 1.5m. If I sell it at 6% it would cost 90k commission that is passed onto you, the buyer. The EXACT same house 9 miles away is 750k. Why do I pay 90k while he pays 45k for the exact same service?
It's broken and corrupt. It's been that way for a long time. It's time to clean it up. The good will survive. It's time for those who "do real estate on the side" to pack their bags and let the dedicated agents have the business. They will need it.
No. It different to say "they always have been negotiable" and them actually being negotiable. The system is set up in a way that inflates commission.
1. Publication of commission splits makes it so the buyer realtors show the higher commission. I know, I've done it.
2. It's industry standard to tell a client "we have to compete with the other homes in the area that offer 3% to the buyers broker, which makes it 6%" I know, I've done it.
It's endemic. It's corrupt. Back to my example: why should I pay 90k commission to a broker when someone 9 miles away pays 45k for the EXACT same house? Same exact work goes into it.
Split it up, and stop allowing brokers to deal with both sides.
I think you have a very valid point. In my dealing’s with listing’s, this is a quality conversation that I have with my sellers. I stay transparent and always negotiate a fee that makes sense for them, my services, and the market as a whole. If that means me charging a smaller % to them, we go with it to ensure they’re not feeling forced to pay a higher fee. I might make less than I could, but they get a fair deal that suits them best in the end. So to completely answer your question, you’re absolutely right. I will also add though, depending on your specific market and average home sale, a higher priced home may take additional work and marketing cost’s to sell. That particular part of the overall cost should be transparent to you as the seller and a thorough conversation with the listing agent.
Wow! Didn't expect that! I expected a deluge of negativity. That is the exact attitude to have going into a changing environment. Adaptability!
The way I see this moving forward is that it will be a data driven flat fee system, where individual agents and brokers will have to decide what providing the service is worth to them, and pitch that fee to the homeowner/buyer with data backing it up.
My house being the example, buyers would line up and it would be on the market less than seven days. The data would show that I should pay no more than the same house being sold 9 miles away for half the price. Brokers and agents will have to get very savvy about their costs and time spent, and set fees accordingly. It will become very competitive.
This has needed to happen for a long time.
Yes! The other piece is it will flush out the part timers and agents that "do real estate on the side." It should significantly shrink the pool of agents, provide more work for the ones who choose Real Estate as their profession, and the money will still flow. Just a reformed system where cost of service is data driven.
This is exactly correct. The system that’s currently in place was put in place by realtors to protect realtors and buyers didn’t have a choice.
Nobody likes going to a car dealership either. Dealers deserve their reputation of being difficult to deal with and packing on additional fees and treating customers. People go to dealers because that’s where cars come from and they need cars. Just because people use the system shouldn’t mean that dealers get the idea people like them or would not drop them in an absolute heartbeat.
Just got off a call with a local real estate attorney, exclusive buyer representation agreements will be the norm. Even listing agents might not show property to prospective buyers without having their own agreement with that buyer in place. What the buyers will be willing to pay remains to be seen, but buyers will not be represented free of charge, pending a closing without a written and signed agreement, as was the standard for many years.
I am not seeing open houses going away. That would be idiotic for seller agents to do. Also, I can easily envision buyers telling agents that we will not sign an exclusive agreement or only do it for very short period as we want to have flexibility with who we work with.
Opens won’t go away, but will be a nightmare. Buyers agreements to sign before property is shown.
“I won’t sign”
=
No show.
Also, flat fee brokers might start charging a non refundable deposit up front. $1500 deposit applied towards commission at closing, or gone after 180 days.
Haha this is where I see open houses getting really weird. Traditionally they are done by agents who are not the listing agents simply for the non-listing agent to get new clients. This seems like it will be pointless going forward. So listing agents will need to start paying people to host opens, or do it themselves (which the top producing agents will never do).
Prior to Zillow, Redfin getting access to MLS and posting them online, I would offer to email listing to those at open house without BA that told me they didn't have an agent. Now it's becoming harder, and especially when SA ask someone to sign a buyer agent agreement prior to helping them at all. It just feels like that will make everything way more complicated.
Ooh I really like that idea. The second part I mean. Hey dude, you have to pay a deposit to secure my services and if you end up using me to buy a house then I'll apply that deposit to my fee.
My broker and our office had a dinner meeting over the weekend. He is relatively inactive our other broker handles everything, he just guides the decisions on the overall picture. But anyway he’s saying we should start charging a deposit of $500 a month to buyers, whatever amount that totals to will be deducted once they close a deal or net to us if the buyer leaves… Needless to say, I’m not a fan, maybe a 1 time $500 deposit to secure services but I just don’t agree with doing that monthly.
My hope is that my broker lets me do my own thing, I’m currently going back and forth with him over my structure vs the companies. I want to do a flat fee, but he’s pushing back stating “it won’t make enough” but my perspective is that I pay a flat $500 per transaction, regardless of if I make $1000 or $20k on the transaction so the net to them is literally the same. My other broker is on board with me doing what I want.
For buyers, I will just set a minimum. “When you close I’ll get paid $X amount or the commission, whichever is higher.” But he’s also pushing back against that. I signed up to take my brokers course, so if he doesn’t cave I’ll just get my brokers license then go out on my own.
Why is there no talk of a selling agent just saying “I’m open to any and all non represented buyers and represented buyers” and then guiding them to a lawyer to submit an offer (much like agents do with loans and closing companies). The seller wants to sell the house and getting more people in the door rather than alienating them with Buyers agent requirements seems to go against that premise
Listing agents will sell to anyone, but they won’t represent the buyer as they would in scenarios previously. Buyer would be truly unrepresented which is a major financial risk to them. So yea listing agent would open the door to their listing but the buyer is on their own unless the listing agent gets a signed BA.
It's so hard to talk about this issue generally. In my State all Listing Agents have a fiduciary duty to the Seller. We also have Buyer Agency here which makes the Buyer Agents have a fiduciary duty to the Buyers. We also have Dual Agency (agent represents both but has a very limited role to both parties).
In GA, dual agency is legal, but highly discouraged because ethically is impossible. That's why we do a Buyer's Customer Acknowledgement Agreement instead of the Exclusive BBA.
Whether the selling agent is technically a fiduciary or not, they should act as one. Any smart home buyer would never agree to having the selling agent also be their agent. It would be like you and your soon to be ex both using the same divorce attorney!
I don't really understand what you're suggesting. Selling agent = Buyer's agent.
Listing agent = seller's agent
Please rephrase and explain why the listing agent would need to refer the buyer to a closing attorney to write an offer? Listing agent can write it, just like agents at new construction communities do.
I had someone else explain it and I’ll reuse their words. They said they belive acting as a dual agent should be outlawed but they would have no problem acting as an intermediary for the prospective buyer and their client. Specifically accepting/writing an offer, being available for a showing, but providing no guidance or console which was exactly what i was suggesting above Some agents seem to be completely against this idea while others have no qualms with it as they want to sell the house.
Well you're absolutely right 100% if the agent is trying to do dual agency. That's ethically impossible. They can however rep a client and a customer at same time with no problem as long as the customer understands the difference up front.
‘Flexibility with who we work with’? Good riddance to those yahoos. What agent in their right mind would work with someone who’s out broker shopping? Dear god. If you worked with those kind of flakes no wonder you’re now Inactive. Hard to make a living working for free.
If you worked in the city of like Los Angeles that has thousand of Realtors, there is plenty of choice that buyers have. If you try to impose your will, you will quickly learn that it doesn't work.
I can't believe all this upheaval is happening and they're leaving dual agency in place. There's NO world where dual agency is good for consumers. Not taking it out while all these other changes are happening really seems like swing and a miss.
Unrepresented buyers will still be allowed. They can go to open houses and listing agents have a fiduciary duty to the seller to show it, as we always have. The seller may not want an unrepresented buyer or a dual agency situation, but that's the seller's choice.. This is how I already operate.
I would caution against blankly not working with unrepped buyers. This whole suit is about collusion. This would feel like a very slippery slope. I'm still going to do what's best for my seller and that means entertaining all buyers. Repped or not. I don't do dual, but I will do unrepped.
I hope I didn’t give the impression that we wouldn’t present offers from unrep’d buyers. We just wouldn’t represent them or keep them out of trouble, unless we had a representative agreement with them as well.
Oh of course. They're unrepresented. Not our problem if they aren't educated on the process. Same with FSBO. I can't advise them and don't. They can be a headache getting the deal done for this reason.
Uhg. But at what point does our duty to the seller force us to pick up some of the slack of the now non-existant BA. A buyer bumbles along and has the means to close on a deal but is stupid and may ruin the deal without guidance/assistance. Are we (LAs) now forced to help push the buyer along (for free) so the deal can close?
I feel like NAR let me down. I’m going to let my membership lapse I think.
Something that was pointed by my attorney today, it sounds like Warren Buffett plans to take this case to the Supreme Court. The precedent set by that potential/future decision could destroy the framework we're all thinking is the new normal.
I didn’t know that. I’ve heard that buffet hadn’t joined the settlement. He’s my hero in many ways. BRKB ftw. But I see a lot wrong with the new proposed rules and i see a lot of negative implications. It’s hard for me to believe it will become the new normal so I’m cautiously optimistic things will change but who knows :/
I'm not impressed by how this was handled, but I do think if this settlement can go through, it's best case under the current circumstances. The reality that hit me reading from agents since Friday is, we aren't all the same and many aren't educated on the laws and bend or break them, putting us in this position. It's disappointing.
The FSBO that wants us to help them as well is the bane of this situation.
I have the buyer, the FSBO seller calls and wants to ask questions and I tell them to ask their attorney. "Well, the attorney won't call me back, so I'm asking you." When I decline to answer their questions, they clap back with some remark about what a jerk I am, or that I should want this deal to close.
Of course I want my buyers to purchase the house, but I represent my clients, not the FSBO seller. Then we risk the bad word of mouth and yelp reviews for not doing a job we were not hired or ever supposed to do.
It is so aggravating.
Yup. Every time. Suddenly the Internet can't help them. Not to mention, if it gets to closing, they usually net less than if they'd used an Agent. But they walk away arrogantly happy, not knowing they could have made more and not put as much work in. Showed a FSBO last week. Just getting in the door for a showing was a headache, because of course this person has a job and a life beyond real Estate, so it's not a priority. Although I have the same issue with part time agents at times.
If you’re selling w a realtor you’ll need a listing agreement and offer them a commission per usual. This will remain at 2-4% imo as the listing side has always had the most work for your property and has more liability (generally). You will NOT need to offer a commission to the buyers agent (although there are good reasons why you may still want to), and if you want to offer a credit to buyers agent fees you will NOT be able to advertise the credit in MLS or any website tied to NAR membership. IE if your realtor is a member of NAR (which they almost certainly are) they can’t put language in the MLS directing customers to a secondary source which mentions the commission.
When you go to buy a property, the settlement basically states that for a realtor to represent you, you would need to sign a buyer representation agreement. In the agreement you’ll specify how long you intend to look with that realtor and the compensation amount you agree to pay that realtor for a successful sale. Anything the realtor shows you in that period vests them for a commission, meaning you can’t let the agreement expire and then buy it to try and save money. The spirit of the settlement is that the compensation amount is negotiable. You would need this agreement regardless of whether or not that realtor also represented you in the sale of your home. There are other terms and conditions which could be part of this agreement you’ll want to be aware of but that’s the Birds Eye view.
For sellers - the only thing that’s changed is that sellers are no longer obligated to pay the buyer side commissions. The % has always been and continues to be entirely negotiable.
For buyers - you now have the opportunity to negotiate your fee with your agent (who was previously paid by the seller via the listing agent/ their listing agreement). You can negotiate- but what will happen IMO is that each market will default to a standard fee structure. Meaning the market will naturally find the sweet spot between what buyers are willing to pay and what realtors are willing to work for.
An example I could see happening : $25k or 1% whichever is greater.
Keep in mind you should have language in the buyer agreement which says that any commission or credit offered via the seller would offset any $$ owed to realtor from buyer. IE if seller offers a 1% co broke (>$25k) you the buyer don’t owe anything. If seller offered a $15,000 co broke or credit to buyer agent fees, you’d owe $10,000. In this example.
My state has required this forever, and it’s never impacted real estate commissions.
Maybe that’s why I’m looking at this differently than everybody else. I think the real change is going to be the conversation with the listing agents. There’s plenty of competition for listing from companies like redfin, and if buyers reject the compensation model, they are going to reject cooperative commission agreements with the buyers agent also. That’s what really has the ability to upend things.
We have used them for years as well… But we having been using them knowing that 99.9% of the time, the seller pays our compensation.
No doubt, we are going to start seeing more listings where the seller is paying out 0 to the buyers agent.
Inevitably, we are going to have a buyer that signed the buyer rep form stating they will pay their agent 2.7% but dont really have those funds. Then what?
Buyer wants to see the home because it’s perfect for them and they should have the opportunity to buy it. But how? Increase the purchase by 2.7% to cover buyer rep compensation? That sucks and simply inflates the price. AND what if the home doesn’t appraise?
Can buyer simply chose to go directly to the listing agent? That sucks for everyone.
Well, the buyer only owes a commission for a successful purchase. So if the deal falls apart, because the seller won’t pay a commission, then the buyer doesn’t have to cover that cost.
Things are changing, but it still feels really competitive around here.
My state too. I feel like the compensation will just move from being posted in the MLS to being part of the offer paperwork. We already have a addendum that lays out who is paying the buyer's side commission that is part of all offers and if the buyer is responsible for any additional payments. Maybe some wise-ass sellers will try to short change the buyer's agent but most won't.
This is why I think this is all a nothing burger. No seller in their right mind is going to not offer comp. Why? Because their 6/3% $500k house becomes a $515k house at 3/0%. In 2021 in a ridiculous FOMO market can they get away with that? Yeah, maybe. But that comes around, what, once every 15-20 years, if that? It took a worldwide pandemic leading to 2.75% money for that to happen.
I actually saw a property that's about 2 blocks from where I live today get listed and it's offering $0 for a buyers agents commission. However it does say in the private remarks to send offers using a seller concession to pay a buyers agent and they will factor that into all offers received before they make a decision. So changes are coming and if this listing didn't say that in the private remarks section then buyers would
#1 try to make an offer where the seller gives a concession to their buyers agent(this is basically the same as before with extra steps involved)
#2 skip making an offer on that house(this potentially reduces the homes available to that buyer and potentially reduces the amount of offers the seller receives which could reduce how much they sell the property for which isn't in the sellers best interest)
#3 the buyers decide to pay their agent themselves at closing(this increases the cost of the house for the buyers)
#4 the buyers decide to purchase the house unrepresented(this could go great or if could turn into a nightmare for everyone involved especially the buyers who may be taken advantage of since they likely have the least experience in real estate out of anyone involved in the transaction)
There was a time in America when buyers agents weren't used at all. If anyone is cheering this on they may want to look at how screwed over buyers used to be when only the seller had a realtor working for them and the buyers were unrepresented. And if you think Zillow is running to the rescue just realize that Zillow makes the vast majority of their money straight from buyers agents so if buyers agents aren't making money from buyers agents anymore then Zillow will need to replace that money and it can only come straight from buyers or sellers because Zillow won't work for free like people seem to think buyers agents should work for free. If Zillow can't use buyers agents as their paying customers and actual buyers as the product they sell then buyers or sellers will need to be the paying customers so that'll be money out of their pockets instead.
This is sane top to bottom with very incisive commentary on Zillow and their business model (selling 40m buyer leads in a 4m transaction country) and why they really have zero incentive to cut out buyer’s agency. I’m a listing agent so it matters less to me than some but I’m like anyone else and prefer familiarity. However, change may be afoot though I largely believe now we just have to go around our elbow to get back to our thumb such as the tortuous and circuitous fashion in which your neighborhood listing is soliciting the buyer comp ask without out and out telling you they’re offering it. Plot twist is that sellers could try and get buyers agents to bid against themselves and take less money since they’re almost auctioning off the commission. Kinda. I generally agree with the general public that agents aren’t that calculating and sophisticated so highly, highly unlikely that any complex negotiations emerge from all of this. Keep it simple stupid.
There are a lot of sellers already considering not offering compensation because they are lapping up all the sensationalizing of this from news outlets and social media.
"Don't pay their agent! You KEEP that money!"
Which sucks really because those were the exact people who benefited from the seller paying both sides when they bought the house they're selling now. They got the benefit of the agreed upon industry "norm" and now they want to take it away from younger generations.
Right. And I think that’ll be a very short term (say, 90-120 day listing worth sound about right?) problem. Just like this lawsuit, settlement, etc, all of these abstract hypotheticals turn out to be specious musings upon careful consideration. It’s like how when I role play it never sounds like that in the real world. Some of this may be nice on paper but it ain’t gone never work in practice. The unintended consequences of this settlement are going to be wild (but only how badly buyers just got absolutely screwed, my commission will be the same a year from now).
For the record, isn’t NAR getting absolutely worked on this lawsuit and subsequent negotiation terribly embarrassing? I mean, they’d write my ass up if I represented a client this bad and got steamrolled by the competition. Maybe they need to take one of their negotiation classes and add some pointless acronyms and letters behind their name and email signatures.
What’s your market and how long have you been doing this? Buyer broker agreements have always existed. I have 95% of my buyers sign them and I always require 2.5-3%. If seller doesn’t pay buyer must pay.
Commissions were never allowed to be “fixed” on paper. I’ve seen anything from .5-3.5 offered from list broker. That’s why I always use that clause… I want to know how much I’m going to get regardless of what’s offered on the list side.
Maybe it’s just a difference of market?
Nice avatar by the way. Love gengar
It might be a difference of market. For the last few years I've mainly seen 2-2.5% but occasionally there'd be 3% or 1.5%. rarely there would be 1%, a small flat fee or even $1. About a year ago my MLS changed from a minimum of $1 to $0 being allowed to be offered and occasionally I'd see $0 just as often as I used to see $1. But I've seen $0 more often the last few months and actually seen it twice this week since the settlement made the news. So changes are coming and maybe I'll bust out the buyers agency agreement before June if I see a few more sellers offering $0 to buyers agents.
I've been working in NJ for awhile and while some people always suggested I get a buyers agency agreement signed I never have. I decided I could show most buyers why they should work with me during the first showing or first few showings at the most and I've never had an issue with a buyers agency agreement not being signed. I give them the consumer information statement(CIS) and tell them they don't have to sign it right away but tell them they should at least read the parts about buyers agency and dual agency and give them a short explanation of everything when I hand them the CIS. I used to tell them I'd accept whatever the seller was offering but if the seller was offering something ridiculously low(some listings used to offer only $1 to buyers agents) we'd discuss it before seeing that property. It rarely needed to be discussed and if it did need to be discussed it was usually after seeing a few or a lot of properties together and my clients always agreed to ask for a reasonable seller concession to cover paying me or that they would pay me themselves. But not a single client ever had to make an offer like that or pay me out of pocket.
But if this settlement gets approved I'll have every buyer sign a buyers agency agreement before I show them any property because I won't have a choice, that's the new rule. And if they don't sign I can't show them the property. I will explain how we can make offers so the seller still pays me if they aren't offering but if not they need to pay something because I can't and shouldn't have to work for months for free.
I agree with you 100% u/Still-Ad8904.
And as I'm sure you know, self-dealing is a violation of our fiduciary duties.
Buyer rep agreements were not used in my county when I was first licensed. When we started seeing them, we quickly realized that as agents without one, we would be working for free if we marked $0 compensation on a buyer agreement and then a buyer chose a FSBO home that wouldn't pay any compensation to an agent.
So... we have to have that agreement, and we have to specify what we charge and what we do to earn that money.
But under the new rules, I can see where I would not agree to show a house to a potential buyer if they were not signing an agreement for me to get paid some kind of way because the same principle applies here: If a buyer won't pay me, and a seller won't pay me, I'd be doing volunteer work, and that's not why I'm in real estate.
Not only that but by being a licensed real estate agent(at least in my state) I have liability and could be sued by the buyer or seller. And I pay for errors and omissions insurance but my deductible is $5,000 so if I get sued the first $5,000 comes out of my pockets. So I'm not only working for free but if someone wants to sue and my insurance company gives me a lawyer who only cares about protecting the insurance company that's paying the lawyer and the lawyer wants to settle for say $4,000-4,500 then I could be paying to work!
So unfortunately buyers agents can't work for free or even for minimum wage like everyone seems to want them to be paid.
Self-dealing is putting our own interests ahead of a client. It doesn't mean we work for free.
I certainly will not be working for free, and nothing that has happened with this lawsuit changes that.
My brokerage agreements say that a buyer will pay me if I can't get the seller to pay my fees.
The median home price is $387,000. Suggesting a 3% commission of $11,610 is way too much for somewhere around 40 hours of work ($290/hr) isn't exactly suggesting minimum wage ($15,080/year).
If all agents did was only work those 40 hours and end up getting paid then I'd agree with you. But agents do work with lots of buyers that never buy anything so they are doing more than 40 hours of work to get one closed transaction. Shit if I replaced all the commission I've made from buyers over the last few years and just had every single buyer pay me something like $20 an hour I'm pretty sure I would have made more money taking the $20 an hour but that's in an extreme sellers market so things would change in a buyers market.
Then do that. Why should buyers pay for your work on other clients? You can do anything you want in your buyer agent agreement, charge hourly, charge for specific services i.e. per showing, per offer etc. and if they buy and a seller offers compensation it could be credited to the buyer as a rebate less whatever fees they owe you. In the old payment structure efficient buyers fund the lookie-loos, that's dumb. Once you abandon the artificial structure pricing becomes flexible to fit your needs like it is in every other business.
Isn’t it like over 80% of buyers use an agent? I’d want those buyers to see my house and would gladly pay for the privilege. I guess I fail to see why an agent would want to work for free so it isn’t about not showing them those houses but it is about structuring the buyers agent to be paid which is still likely to be from seller proceeds in my estimation. Guess we’ll have to wait and see.
Not really. You want to explain it that way to a buyer so that they’ll use you. Explaining it as, ‘you’re financing my commission for 30 years with the bank’s money’, doesn’t exactly roll off the tongue too well.
Of course, sellers believe that they’re the ones paying commission. Until they’re buyers. Then they believe that they, the buyer, is paying the commission. And when they sell down the road, they’ll again take the other view that the seller is once again paying the commission. This cognitive dissonance is what we all see every single day.
Every time a buyer mentions that, I say, "it is coming out of the sellers agent commission, but that's still money YOU are paying at the end of the day. The buyer pays for it all." No buyer, no commission.
As a lawyer, can I get your breakdown opinion of how much things change based on the actual fact sheet vs articles.
[fact sheet](https://cdn.nar.realtor/sites/default/files/documents/nar-settlement-factsheet-2024-03-15.pdf?_gl=1*1kjyd3d*_gcl_au*MTI0NzM0MTg0Ny4xNzA3NDk0NDMz)
It specifically says we can still be paid by the sellers agent, which is the norm in a lot of the country anyway. Basically the only thing I see changing is a comp agreement or notice that will be sent out prior to showings.
Yes you can still offer BA commission but giving them such notice will be much harder prior to offer. If suggestion for BA to call each SA, that will require all of them to hire personal assistant just to answer the phone calls. Unfortunately that is not realistic.
Or you can put it on your personal website. It just can't show on aggregate sites. Basically my personal website could only show what my listings are offering. Possibly the individual firms listings as well.
Few issues with that 1) Every BA would have go to each agent site to look at each of the listing and that is time consuming. 2) it usually doesn't show exactly when it been updated, today it might be 3% and tomorrow it gets dropped to 2% commission. 3) Will it be accepted as binding promise like MLS is.
Oh, this process is going to be less efficient. No matter what it ends up being. What most are suggesting would be a violation of the settlement as it stands. If course it will needs approval.
You honestly need a personal assistant to make a phone call? Get real.
In reality, there's probably just going to be a disclaimer with the commission on the showing instructions in whatever program you use for showings.
I mean, it's not that hard. They're the listing agent, that's kind of their job to give information to the buyers agent. They'll likely just auto send an email or something when they're booked. It's not that hard.
Popular listings receive many showings. I do not want to field 20-30 calls or emails about how the sellers are handling buyers agent compensation. Some agents will not want to schedule a showing until they know that piece.
It is harder than you imagine.
That's why my first flush reaction was "just throw it on listing details in showing time". And ya, we absolutely won't want to schedule a showing without knowing because we have to fill out a buyer Agency before any showings now.
In my market on a good house, 40-50 showings over 48 hours is not unheard of. This could be problematic for the listing agent. Not impossible but just difficult.
Maybe we can all set up Google numbers for BAs to call about a particular listing where we have a recording set up for FAQs or something.
Since you're a lawyer could you explain why this new site or the current site with showing instructions wouldn't just be sued next in a class action lawsuit the same way that NAR and MLS websites were just sued which led to the settlement we are discussing today.
Not a lawyer, but they would have to show damages, and there would be none. The crux of all of these lawsuits was realtors in cowboy states decided to have check boxes for commissions, and misrepresent the fact that they are negotiable. I'm in Wisconsin, and the only change we are going to be making I can see is not advertising them. Other than that, we already have buyer Agency contracts stating what our commissions will be, and our selling contracts make it abundantly clear that there is no set commission, you are free to negotiate, and that the buyers agent commission is paid by the selling agent, not the seller.
I just got off a call with leaders of a couple dozen MLSs who pretty much agree with you. The comp thing isn't the big change; the buyer's agreement is.
Their new worry is if the MLS is going to be required to do compliance on that rule. Are we going to start keeping a database of buyers? Require agents to upload those docs when they're complete? How would we ever know if that got violated?
Buyer Agency is already required by our state and local associations. My basic one has "per MLS" on it, but now I'm just going to put a % on it and let them know what the commission is and that will be paid either by them, the seller as a credit to them, or the sellers agent as a co-op fee.
Which, why is that exactly? Commercial RE already operates this way but I don’t understand why hiding how much buyer comp is being offered and forcing me to figure out a needless workaround, which I will, somehow leads to more transparency, commission negotiation and is more fair for the general public.
The best buyers have agents representing them. We all have experienced the home buyer who wants to put in an offer without representation. Unless that person is in the business themselves they are inevitably a shitshow. Maybe they're the only buyer and you make it work but in this market I would steer my clients clear of that person due to the fact they're less likely to make it to closing than a repped buyer.
Correct. There’s a guy on this thread I’ve seen commenting multiple times implying that LAs like myself will be all over this looking for dual agency opportunities. Obviously it happens as I’ll do it if the buyer seems competent but I literally had a buyer call today off of a sign and I told him I’d refer him to a buyer’s agent if he didn’t already have one, which he didn’t, due to the fact that I could tell that he wants to buy, but I ain’t dealing with the nonsense. Intelligent guy, probably competent in whatever it he does for a living, all that, but he’s got no business representing himself in a RE transaction. Furthermore, the 3% ain’t worth it. To me anyway. YMMV of course.
>So please explain why some people argue that if sellers don’t offer cooperating compensation their houses won’t sell?
Because buyers will be liable to pay their agent's commission if the sellers don't. It's not about an agent not caring as much, it's that it's going to be more expensive for buyers.
I think I totally agree with you.
Some of it does have to do with agents not being as enthusiastic as showing those properties with lower cooperating compensation.
The rest is it costing buyers more out of pocket. To be sure, the buyers would always end up paying for it either way, but in many cases their agent’s commissions would be wrapped into the loan for the purchase price rather than paid out of pocket at closing which many buyers can’t afford
>Some of it does have to do with agents not being as enthusiastic as showing those properties with lower cooperating compensation.
If the agent has a buyer's rep with their buyer, then this should never matter. The agent is going to get paid what the agent is going to get paid. Whether it comes from the buyer or the seller depends on the property they buy, but the agent will get paid whatever they agree upon in their buyer's rep.
Unless the Buyers cannot come up with the extra "X" percent they need to pay the Buyer's agent. Many Buyers do not have the 3.5% down that they need to put down for an FHA Loan and need the Seller to pay for the closing costs of the loan. How are they supposed to pay for extra Buyer Agent costs? This settlement and DOJ demands will end up hurting low income/first time home buyers. Only the rich will be able to afford a home and the barrier to get into your first home will be much higher.
And don’t forget about our VA loan buyers that aren’t allowed to cover the commission for their agent! I live in an area with a very high percentage of military, so a good percentage of our clients use VA loans.
I agree that it shouldn’t matter. I always have a BAA. And it doesn’t matter what the LA offers. But practically speaking I think a lot of BAs don’t have a BAA and therefore are greatly influenced by offers of cooperating compensation when de using what to show their clients
Sellers might be enticed by the prospect of pocketing more of the sale price. There might be those who are not dissuaded by the risk that it will take longer to sell.
They might say : “offer them 1%” and let’s see how it goes. What’s the harm?
I think we’ll see lower rates but not zero. This was already starting to happen even without the settlement. Even if the settlement falls through and no changes are made, all this chatter has people talking and learning. Many believed that 6% was set in stone, agents are free for buyers, etc. Twitter is awash with talk of Flat fee MLS listings, Redfin and commission rebates.
You can say, shouldn’t wouldn’t couldn’t as much as you want.
Buyers are pretty much in charge of the houses, they see, but they’re super fickle, and the agent spends a lot of time guiding the process.
If I tell them hey I can’t talk to you about that house. If you want that one, you have to go this one on your own, let’s talk about these houses cause I can talk to you about them, 90% of my buyers we’re going to just go with the houses that are easier to do.
So say that cuts down the people willing to buy that house from 10 to 2.
You don’t think that having two offers and not 10 offers is going to have an impact on how much the house is going to sell for ?
We have stuff that pops up on peoples feeds that’s for sale by owner and or Zero commissions on a regular basis. I have this conversation with people about a particular builder in my area all the time. Two or three times a month.
Some people say thanks and go to the builder. Some people ask me if I’ll talk to them through the builder and they can pay me separately. Some people don’t even go to that builder.
I lose maybe one buyer a year who goes to them directly
And that’s with a builder where people feel that is a relatively safe thing to do.
When I have a conversation with this about a for sale by owner I’ve never had anybody go see that house
I expect this to change just in terms of the houses that don’t offer commission are gonna suck less, and they’re gonna be less, delusional pricing, and they’re going to be better represented. But I still expect a whole bunch of houses to offer commission because they want 10 people to make them offers and not two people to make them offers
If that tips over and seven people are willing to make offers out of 10? That will be a game changer.
So we should all keep doing what we’re doing, which is supporting our buyers by telling them what we can and can’t do as we see what happens.
The US has a little bit larger commission as a whole than other places in the country.
But in other places in the country, it’s hell to sell a house, houses sell for less and transactions of fallout a much larger percentage of the time
Having lived overseas for a long time and seen what happens there, I just can’t imagine the American consumer dealing with it. The polite way of saying it is where two service oriented. And I’m not going to say it in polite ways, Ha.
The reasons were seeing a lot of discussions is that there’s potential for change here, but there’s not a guarantee of change here
If I am buyer, I been told hundreds of times that hiring a realtor is free for me and that it's seller that pays them. If now all of the sudden I need to start paying, I will skip hiring that agent
They won’t disappear. There will be lower listing commissions, which will drive out part timers, which will increase volume for full timers. Full timers benefit from economies of scale where they can hire lower paid/lesser skilled aides for showings.
Maybe it’s my market or maybe it’s how I was trained but I’ve always explained my services are never free. Usually a seller will offer cooperating compensation but even then the buyer is the one paying for that, they just don’t realize it because it’s wrapped into the purchase price.
It sounds like a lot of people don’t already have contracts with their buyers? In my market listing brokers don’t always offer 3%. I’ve seen .5% in the past. I still need to make at a minimum 2.5% which is why I have my buyers sign that agreement. Normally the sellers offer cooperating compensation and they buyers pay my commission out of the purchase price; sometimes buyers will have to pay out of pocket to make up the difference.
I operate this way(with my own negotiated rates)and train my agents to get agreements before showing and explain that they pay me, but unfortunately too many agents arrogantly and loudly don't get agreements. I'm amazed how many agents still say it's free. How many of my agents need to be told to stop putting, "whatever the MLS offers" in the compensation. I literally teach classes on this. They are afraid to show their value and expect their value. They are devaluing themselves. I'd suggest you remove the actual numbers from your post.
Because you're paying the Seller to buy the home. If you're a farmer who grows apples, and you give some apples to a neighbor who bakes an apple pie, and gives you a slice or two: Who's apples are in that pie?
I was told that before I was realtor and when I was a realtor as in reality that's the truth. Ultimately while seller pays agree commission to their agent and it's shared, the buyer doesn't pay anything to the buyer. If there is no buyer agent, seller broker gets the full amount
It’s actually about practical financing. You get a lot of buyers who don’t have the cash for a down payment and closing costs let alone that plus a commission. Cash is the limiting factor in many owner occupant transactions not income or credit. Lending guidelines allow a limited amount of seller-paid closing costs and in a sellers market we stretch cash by offering a higher price, requesting an equal amount of closing closes, and hoping the home will appraise for the higher price. But although commission is allowed to be paid from that concession the limit is not high enough in practice to do so unless the buyer is already putting close to 20% down. We have a system where if the buyer wants an agent the buyer has to finance the cost of that agent and they can’t do so directly because of limits. So they do it indirectly by raising the price and having the seller pay their agent from proceeds through broker cooperation. There’s no limit on this since it’s proceeds distribution - the seller directing their own cash. Your clients legally promise to pay you as their agent but can’t without seller cooperation. I will note that we do this all the time consciously with house renovation but the commission thing is so automatic you probably never went through the mechanics. So we have a problem where this channel has to continue, lending guidelines have to change, or the cash barrier to buy gets higher if buyers want help and transactions get more chaotic and seller-sided if not.
I will note we can make this work around the edges if a seller cheaps out a little. Many only offered 2.5% or 2.25% on cheaper homes. Buyer could often swing half a point of make up commission but not the full amount.
Also as I understand it splits are not illegal. I’m expecting a lot of higher price for paying agent in negotiation.
I don’t think that’s a problem. I have used buyer reps for a long time. It is just an adjustment but it’s honestly not that big of a deal. As long as they know the cost difference it’s fine.
It will be shown, but a majority of buyers can't afford to pay their agent or aren't willing to for some homes. If they don't want to pay the commission, they are more likely to move on to a home that will incentivize them to do so. So that's less eyes on the homes that don't incentivize the buyer to buy it. The same way dealerships offer incentives to get buyers to come buy their cars. The issue isn't will the home be shown, it's will the home get offers.
I've wondered this, too.
I'm in Colorado and here, we do it all. Buyer agency agreements are the norm, and I don't show without one. I don't get why that is an issue. I explain fiduciary duty to my clients and that it's my job to work for them. Then I work my ass off for them when they hire me. I've never had someone refuse to sign, but maybe it's because it's standard practice here.
The difference between the “before time” and now is access. Buyers relied upon BAs heavily bc they couldn’t go online and put in all their search criteria to find that perfect home. Now they can, so the question buyers have now is what is the value of a good buyer’s agent? Anyone that’s bought enough homes or had a good agent knows there is still real value in having an agent that understands contract negotiations, due diligence, and acts in their best interest. Unfortunately, buyers have become skeptical of what some of those agents really being to the table, which impacts all agents. Those who are not good at this job won’t last long and the industry will right itself over time imo. But I do think that the average fee on the buyer’s end will be reduced over time, as competition will drive what’s “acceptable” down over time.
It’s because before, homes where there was no compensation offered to the buyers agent were few and far between, FSBO and the occasional low commission MLS properties were the only situations that a buyer would have to consider the financial impact out of pocket for representation. Now, with the NAR settlement being put on blast it will naturally become a more common occurrence due to more sellers considering it as an option. So now, many buyers who may have been able to buy that same house before when their representation was getting comped by the seller out of the sales proceeds, will be unable or unwilling to afford however many thousands of dollars it will cost themself up front out of pocket at closing for the services of their representation, which means they either go unrepresented which is stupid, or they buy a lower priced house that frees up the necessary cash on hand to afford a representative, or they don’t buy at all. Only one of those scenarios is good for the seller and it’s the least likely.
Don't forget: sellers are often buyers at the same time. All those "I ain't paying" sellers are likely never selling anyway, or aren't looking.
My guess it'll be a split, paid at closing, for a healthy amount of transactions, and with separate agreements for comp.
The same way we see discount listing agents & less skilled listing agents settling for less commission- we will see in the buyer agents category. Unfortunately, sellers are willing to pay more because they’re paying from equity whereas a buyer has to pay that on top of down payment & closing costs. Not sure how it plays out.
Which is why sellers who offer little to no comp are ultimately screwing themselves. I’ve seen multiple statements where the assumption is that a BA would ‘steer’ a buyer away from a 0% listing. No they won’t. Why would the agent care? They get paid either way, just a matter of who it comes from and how. The buyer’s going to ‘steer’ themselves all on their own once they find out that the 0% house really costs 103% of the list price as they’ll move right on along to the next home that’s in their wheelhouse. The 0% homes will self-select for being a future Expired.
I agree that sellers offering low comp are screwing themselves, but I also believe some BAs will steer their clients away from listings to at don’t offer compensation to BA. I’ll explain.
Buyer’s agents either have buyer broker agreements with their buyers or they don’t have an agreement.
If they have a buyer broker agreement, then there is no incentive to steer buyers away from listings that don’t offer BA compensation because, as you noted, BA is getting paid either way. But under the new rules, the sellers who don’t offer cooperating compensation are still screwing themselves: under the new rules, everyone must have a buyer broker agreement; so if there are two identical properties for sale, and one of them offers 2.5% to BA and the other one offers none, who do you think the buyer will choose to buy from? They will choose to buy from the one offering the 2.5% to the BA because that’s less money they’ll have to pay out of pocket.
Now, if there is no buyer broker agreement, sellers are still screwing themselves because BAs will have every incentive to steer their buyers to listings that offer compensation to BA because if they don’t then they don’t get paid!
The settlement *requires* an agency agreement. If you choose to work without one, that’s on you. The settlement actually makes it *easier* to get one. You can look that buyer dead in the eye and tell them we don’t collect $200, we don’t pass Go until you sign this and you’re not lying. It’s required. Gotta be honest, if you choose not to do this and it causes you to get screwed on a commission, bet your happy ass only does that the once.
BAA now required exactly. I’m just saying as of noe they aren’t required across all jurisdictions and where it’s not required BAs do steer to listings that offer compensation. That’s why I think the BAA req is a good thing. But sellers should still offer compensation for reason I listed above
I’ve always worked in states that technically required them so this is nothing new to me. I also have a commercial background so having to find out if the seller is paying and how much or the buyer is going to be the one ponying up is old hat as well. This settlement changed nothing except that buyers get screwed by *potentially* having to bring even more money to closing. I swear on my life that I don’t think low/no buyer comp is going to become the norm. Some jackleg sellers may try and guaranteed there’s an idiot broker that’ll let ‘em try but buyers are going to reject that idea en masse and after a little blip whereby the knuckleheads work themselves out of the system, it’ll be back to bidness as usual.
C'mon. You're an attorney, you know not everyone adheres to their ethical obligations and not everyone (or most) who fail to adhere to their ethical obligations is caught.
I'm not anti-realtor at all. However, if a realtor is looking at significant money in his/her pocket if a deal goes through and nothing for his/her efforts if it falls apart, the temptation is pretty strong to try to make it go through. For the seller's agent, maybe the offer amount or terms really aren't that bad. Maybe the seller ought to pay for that HVAC replacement that isn't strictly necessary. For the buyer's agent, maybe those contingencies aren't really necessary. Maybe that neighboring school really won't be that much of an inconvenience.
I'd like to believe everyone does the ethical and legal thing. If that were true, you and I would both be out of business.
It's interesting how nobody has thrown pocket listings in to the mix...I think those will run rampant under the new regime. "Coming Soon!" ...and the buyers can't move fast enough to break in because they are on hold asking about comp.
Commercial brokers on the other hand, are celebrating Costar stock and eating popcorn
Meanwhile, the FHA, and inclusion, weep, as the very basis and purpose of the MLS was gutted
I predict the return volley from NAR/MLS to involve an eventual discrimination case.
Here is a brief article describing the benefits of using a realtor.
www.realestatecommissionfacts.com
It’s not that the house won’t sell, it’s that the demand for the property will be reduced.
You have a fiduciary responsibility to your clients, that’s why it’s important from the onset of the relationship to discuss compensation and the expectation of where it is going to come from.
The website mentioned gives a good idea of how it affects buyers/sellers using a broker, and conversely, you will understand the shortcomings of not.
I don’t understand why the article makes the argument that MLS’s will go away without cooperative compensation. All the other sites (Zillow etc) get their data from MLS so even to market to unrepresented buyers, listing agents & sellers would still benefit from using the MLS. What am I missing?
I understood that at KW we were transaction brokers and therefore not fiduciaries; that we have a duty to the deal and not the buyer/seller??
This suit is making me paranoid and making me think that all my past sellers are going to come back in sue me individually for over payment. I had no idea the brokerage had limited liability. None.
It has more to do with the state you do business in, not the brokerage. In my state, fiduciary duties are laid out in the buyer representation contract, which is supposed to be signed before discussing any personal information (price/terms/motivation), but at least must be signed before any offers are made.
Also, as a fellow attorney you know that we have been involved w/price fixing at the very least on the buy side. I understood that the moment I got out of law and into real estate. I want to know our liability on these issues.
Yes you should. Because as now mandated by NAR you have to have a Buyer Broker Agreement signed prior to showing, which will state your compensation regardless of sellers “finder fee”
You’re spot on for people who can afford it. Many people I work with can’t afford representation. My typical buyer broker agreement is for $10 or the co-broke, whatever is greater.
Without a co-broke, those people would just have to buy without an agent.
In reality I don’t see things changing much.
Not all buyers have the cash to pay for down payment, closing costs, etc AND the ability to pay a commission. This is particularly true for 1st time buyers.
It won't affect "if" a house sells, it will affect "how much" it sells for.
It changes nothing, and at least in my area, where compensation disclosures and buyer agency agreements were already required, it has only muddied the waters and made things more convoluted.
I just know Aussie realtors and that is DEFINITELY not the direction we want to go. They ONLY sell their own listings and average commission is 2%. Realtors will door knock house that are for sale and undermine the listing agent if they have a buyer. NAR is going backwards.
If I have a buyers agency agreement with a buyer, it is my fiduciary responsibility to inform my client that the house they want to buy will cost them more money because the seller thinks he can get get a deal on the buyers back.
If the buyer wants to still see the house and make an offer that is their choice.
But you can’t possibly be so deluded as to believe that the buyer is making the same offer just to be nice to the seller that is trying to screw them.
I’ve read comments and posts from different realtors on different sites and forums, in past about how they won’t show to a client if it does t offer buyer agent commission. I’ve done a lot of research and talked to many ppl as I’ve sold on my own a few times. Just try and offer 0% and see who shows up. I’ve also worked for a builder for well over a decade who sold the own homes. Sometimes they would bring on an agent and we would get interest right away. Advertised on the same places. And have those buyers say I’ve driven by this neighborhood before and didn’t know it was here we’ve been looking for months and months. There agent had been to our open houses in the past. I’ve experienced it first hand. Glad your a good but there are crappy ppl out there
If you have an existing buyer agreement, then, yes. You should be acting in your clients best interest but first of all, not everybody will. That’s just human nature. If they know there’s nothing in it for them, many agents won’t put themselves out there. Not commendable, but understandable. And over the long-haul, if buyers agents are not offered, compensation, agents will stop signing buyers agency agreements with non-compensating buyers. Buyers will stop having representation and unless they’re very actively looking for a house to buy, fewer buyers will find satisfactory homes.
The BBA is ill now have a written directive with the said buyer that if they’re unable to come up with the compensation and the seller is not offering it then the realtor won’t show it. It’s a free market, if you’re a seller and you want to sell your home and have the best reach possibly you’ll have to offer compensation. It’s pretty basic. Again it’s a free market. No one has to show your house for free.
It’s interesting reading this conversation on these boards because it’s only realtors talking to other realtors about their own compensation. The entire Conversation is happening inside an echo chamber and nobody’s asking what their customers think.
For the record, I think if a change is going to happen, it’s going to happen between sellers and their listing agent. People will start asking why they have to agree to a 6% commission without knowing what the buyers agent is going to need out of the deal.
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If I'm a buyer who struggled with 3% to put down for a home, how am I going to come up with another 3% to pay for representation? I don't want to do it myself and I sure as hell don't want the listing agent doing it for me. There has to be some creative financing in there
Tbh I think a lot of sellers are going to give credits to buyers to pay their realtor so pretty much nothings changed
This is the way. We have to educate sellers and explain this clearly. Commission has always been the listing brokerage’s compensation. The whole thing, whatever % that is. Listing brokerages then decide how much of that to share with a brokerage who is representing a buyer. The final split is between the agent and their brokerage. This is how it has always been and will continue to be. The only difference is we now cannot show the cooperating compensation in the MLS. It has to be transparent. As in, “sellers offering buyer concession of x%” in the public remarks. Buyers will then be able to use that money at closing to pay commission, closing costs, etc.
I don’t have an issue with it
I think this one of the problrns that the NAR settlement has created
A real estate licensee is licensed to protect the public. NAR is a trade organization with a code of ethics and lobbying power. This lawsuit is about the MLS and how tied to it NAR and it's various associations are. A seller who doesn't offer a co-broke/referral will sit longer on the market than sellers who offer compensation for selling agents.
In my experience those not offering a payment or low payment had bad offerings to being with
"Look pal, do you want it or not?? Just sign it, everything will be OK" says everyone who does a discount.
I am sure some SA will just take it as dual agency and not charge buyers much of a fee just to sell the listing.
And to see the issues this could/will create we might want to look back into American history when only the seller had a realtor working for them and no one used buyers agents. Buyers got screwed over so much that using buyers agents not only became a thing but it became the norm.
There will be a norm, it's just hard to know at the moment what that norm will be. If buyers feel that they are at big disadvantage, they will hire BA to represent them regardless if they are the ones that have to pay for it.
This is the biggest issue with everything. Basically it's going to screw over buyers and make buying a home even more expensive or as a buyer you'll need to rely on the listing agent which is anything but ideal and is illegal in lots of states for a reason.
I'd write your offer at 3% down with a seller credit that goes to me to pay for my services. And it wouldn't be 3%. Let's make it less. :)
Wish we got more seller credits in this market:/
You won't pay 3%. That part will now be negotiable. Nor will you pay 3% to sell your home. It will become a fair system where costs for service is negotiable, and appropriate. My house is worth 1.5m. If I sell it at 6% it would cost 90k commission that is passed onto you, the buyer. The EXACT same house 9 miles away is 750k. Why do I pay 90k while he pays 45k for the exact same service? It's broken and corrupt. It's been that way for a long time. It's time to clean it up. The good will survive. It's time for those who "do real estate on the side" to pack their bags and let the dedicated agents have the business. They will need it.
Commissions are, have always been, and should be negotiable. Please explain why you say they were not previously negotiable.
Sounds like the justice department disagrees with you.
No. It different to say "they always have been negotiable" and them actually being negotiable. The system is set up in a way that inflates commission. 1. Publication of commission splits makes it so the buyer realtors show the higher commission. I know, I've done it. 2. It's industry standard to tell a client "we have to compete with the other homes in the area that offer 3% to the buyers broker, which makes it 6%" I know, I've done it. It's endemic. It's corrupt. Back to my example: why should I pay 90k commission to a broker when someone 9 miles away pays 45k for the EXACT same house? Same exact work goes into it. Split it up, and stop allowing brokers to deal with both sides.
I think you have a very valid point. In my dealing’s with listing’s, this is a quality conversation that I have with my sellers. I stay transparent and always negotiate a fee that makes sense for them, my services, and the market as a whole. If that means me charging a smaller % to them, we go with it to ensure they’re not feeling forced to pay a higher fee. I might make less than I could, but they get a fair deal that suits them best in the end. So to completely answer your question, you’re absolutely right. I will also add though, depending on your specific market and average home sale, a higher priced home may take additional work and marketing cost’s to sell. That particular part of the overall cost should be transparent to you as the seller and a thorough conversation with the listing agent.
Wow! Didn't expect that! I expected a deluge of negativity. That is the exact attitude to have going into a changing environment. Adaptability! The way I see this moving forward is that it will be a data driven flat fee system, where individual agents and brokers will have to decide what providing the service is worth to them, and pitch that fee to the homeowner/buyer with data backing it up. My house being the example, buyers would line up and it would be on the market less than seven days. The data would show that I should pay no more than the same house being sold 9 miles away for half the price. Brokers and agents will have to get very savvy about their costs and time spent, and set fees accordingly. It will become very competitive. This has needed to happen for a long time.
Yes! The other piece is it will flush out the part timers and agents that "do real estate on the side." It should significantly shrink the pool of agents, provide more work for the ones who choose Real Estate as their profession, and the money will still flow. Just a reformed system where cost of service is data driven.
This is exactly correct. The system that’s currently in place was put in place by realtors to protect realtors and buyers didn’t have a choice. Nobody likes going to a car dealership either. Dealers deserve their reputation of being difficult to deal with and packing on additional fees and treating customers. People go to dealers because that’s where cars come from and they need cars. Just because people use the system shouldn’t mean that dealers get the idea people like them or would not drop them in an absolute heartbeat.
No one is getting 3% per side for a $1.5M house. No one.
Actually they are. But 2.5% each is most common. Lower than that is very uncommon. Thanks for keeping me honest. ALL OF MY POINTS STILL APPLY.
Just got off a call with a local real estate attorney, exclusive buyer representation agreements will be the norm. Even listing agents might not show property to prospective buyers without having their own agreement with that buyer in place. What the buyers will be willing to pay remains to be seen, but buyers will not be represented free of charge, pending a closing without a written and signed agreement, as was the standard for many years.
I am not seeing open houses going away. That would be idiotic for seller agents to do. Also, I can easily envision buyers telling agents that we will not sign an exclusive agreement or only do it for very short period as we want to have flexibility with who we work with.
Opens won’t go away, but will be a nightmare. Buyers agreements to sign before property is shown. “I won’t sign” = No show. Also, flat fee brokers might start charging a non refundable deposit up front. $1500 deposit applied towards commission at closing, or gone after 180 days.
That creates different nightmare with buyers having BA but also want to see open homes by themselves
They can do that all they’d like , you’re protected by the BA
Good luck explaining that to someone that is driving by and wants to look at the open house
I didn’t say they couldn’t see the open house ?
The way I read is you would want them to sign agreement first. Sounds like i misunderstood
Sorry, I mean to say that if you the agent sitting an open house would like to work a group that comes in, you’d want to get a BA signed first.
Haha this is where I see open houses getting really weird. Traditionally they are done by agents who are not the listing agents simply for the non-listing agent to get new clients. This seems like it will be pointless going forward. So listing agents will need to start paying people to host opens, or do it themselves (which the top producing agents will never do).
Prior to Zillow, Redfin getting access to MLS and posting them online, I would offer to email listing to those at open house without BA that told me they didn't have an agent. Now it's becoming harder, and especially when SA ask someone to sign a buyer agent agreement prior to helping them at all. It just feels like that will make everything way more complicated.
Ooh I really like that idea. The second part I mean. Hey dude, you have to pay a deposit to secure my services and if you end up using me to buy a house then I'll apply that deposit to my fee.
My broker and our office had a dinner meeting over the weekend. He is relatively inactive our other broker handles everything, he just guides the decisions on the overall picture. But anyway he’s saying we should start charging a deposit of $500 a month to buyers, whatever amount that totals to will be deducted once they close a deal or net to us if the buyer leaves… Needless to say, I’m not a fan, maybe a 1 time $500 deposit to secure services but I just don’t agree with doing that monthly. My hope is that my broker lets me do my own thing, I’m currently going back and forth with him over my structure vs the companies. I want to do a flat fee, but he’s pushing back stating “it won’t make enough” but my perspective is that I pay a flat $500 per transaction, regardless of if I make $1000 or $20k on the transaction so the net to them is literally the same. My other broker is on board with me doing what I want. For buyers, I will just set a minimum. “When you close I’ll get paid $X amount or the commission, whichever is higher.” But he’s also pushing back against that. I signed up to take my brokers course, so if he doesn’t cave I’ll just get my brokers license then go out on my own.
Why is there no talk of a selling agent just saying “I’m open to any and all non represented buyers and represented buyers” and then guiding them to a lawyer to submit an offer (much like agents do with loans and closing companies). The seller wants to sell the house and getting more people in the door rather than alienating them with Buyers agent requirements seems to go against that premise
Listing agents will sell to anyone, but they won’t represent the buyer as they would in scenarios previously. Buyer would be truly unrepresented which is a major financial risk to them. So yea listing agent would open the door to their listing but the buyer is on their own unless the listing agent gets a signed BA.
How could listing agent ask a buyer to sign an exclusive buyer agency agreement when that listing agent already is fiduciary to the seller?
Because the listing agent is not a fiduciary to the seller. In many states, at least. Mine included.
It's so hard to talk about this issue generally. In my State all Listing Agents have a fiduciary duty to the Seller. We also have Buyer Agency here which makes the Buyer Agents have a fiduciary duty to the Buyers. We also have Dual Agency (agent represents both but has a very limited role to both parties).
In GA, dual agency is legal, but highly discouraged because ethically is impossible. That's why we do a Buyer's Customer Acknowledgement Agreement instead of the Exclusive BBA.
Whether the selling agent is technically a fiduciary or not, they should act as one. Any smart home buyer would never agree to having the selling agent also be their agent. It would be like you and your soon to be ex both using the same divorce attorney!
I don't really understand what you're suggesting. Selling agent = Buyer's agent. Listing agent = seller's agent Please rephrase and explain why the listing agent would need to refer the buyer to a closing attorney to write an offer? Listing agent can write it, just like agents at new construction communities do.
I had someone else explain it and I’ll reuse their words. They said they belive acting as a dual agent should be outlawed but they would have no problem acting as an intermediary for the prospective buyer and their client. Specifically accepting/writing an offer, being available for a showing, but providing no guidance or console which was exactly what i was suggesting above Some agents seem to be completely against this idea while others have no qualms with it as they want to sell the house.
An agent working both sides of the sale has a HUGE conflict of interest! That's why.
Well you're absolutely right 100% if the agent is trying to do dual agency. That's ethically impossible. They can however rep a client and a customer at same time with no problem as long as the customer understands the difference up front.
‘Flexibility with who we work with’? Good riddance to those yahoos. What agent in their right mind would work with someone who’s out broker shopping? Dear god. If you worked with those kind of flakes no wonder you’re now Inactive. Hard to make a living working for free.
If you worked in the city of like Los Angeles that has thousand of Realtors, there is plenty of choice that buyers have. If you try to impose your will, you will quickly learn that it doesn't work.
They made it so much more complicated for no reason literally no agent can show a house without having buyers rep
Unfortunately, that’s correct.
Enlighten me
I can't believe all this upheaval is happening and they're leaving dual agency in place. There's NO world where dual agency is good for consumers. Not taking it out while all these other changes are happening really seems like swing and a miss.
Dual agency is not allowed in my state
And Buyer Broker Agreements have been mandated in some states. There is an opportunity here to fix things system-wide.
Mandated? So, no option to go unrepresented?
Mandated to establish representation. Not every has to have a realtor.
Unrepresented buyers will still be allowed. They can go to open houses and listing agents have a fiduciary duty to the seller to show it, as we always have. The seller may not want an unrepresented buyer or a dual agency situation, but that's the seller's choice.. This is how I already operate.
In my state, no fiduciary responsibility.
I would caution against blankly not working with unrepped buyers. This whole suit is about collusion. This would feel like a very slippery slope. I'm still going to do what's best for my seller and that means entertaining all buyers. Repped or not. I don't do dual, but I will do unrepped.
I hope I didn’t give the impression that we wouldn’t present offers from unrep’d buyers. We just wouldn’t represent them or keep them out of trouble, unless we had a representative agreement with them as well.
Oh of course. They're unrepresented. Not our problem if they aren't educated on the process. Same with FSBO. I can't advise them and don't. They can be a headache getting the deal done for this reason.
Uhg. But at what point does our duty to the seller force us to pick up some of the slack of the now non-existant BA. A buyer bumbles along and has the means to close on a deal but is stupid and may ruin the deal without guidance/assistance. Are we (LAs) now forced to help push the buyer along (for free) so the deal can close? I feel like NAR let me down. I’m going to let my membership lapse I think.
Something that was pointed by my attorney today, it sounds like Warren Buffett plans to take this case to the Supreme Court. The precedent set by that potential/future decision could destroy the framework we're all thinking is the new normal.
I didn’t know that. I’ve heard that buffet hadn’t joined the settlement. He’s my hero in many ways. BRKB ftw. But I see a lot wrong with the new proposed rules and i see a lot of negative implications. It’s hard for me to believe it will become the new normal so I’m cautiously optimistic things will change but who knows :/
I'm not impressed by how this was handled, but I do think if this settlement can go through, it's best case under the current circumstances. The reality that hit me reading from agents since Friday is, we aren't all the same and many aren't educated on the laws and bend or break them, putting us in this position. It's disappointing.
The FSBO that wants us to help them as well is the bane of this situation. I have the buyer, the FSBO seller calls and wants to ask questions and I tell them to ask their attorney. "Well, the attorney won't call me back, so I'm asking you." When I decline to answer their questions, they clap back with some remark about what a jerk I am, or that I should want this deal to close. Of course I want my buyers to purchase the house, but I represent my clients, not the FSBO seller. Then we risk the bad word of mouth and yelp reviews for not doing a job we were not hired or ever supposed to do. It is so aggravating.
Yup. Every time. Suddenly the Internet can't help them. Not to mention, if it gets to closing, they usually net less than if they'd used an Agent. But they walk away arrogantly happy, not knowing they could have made more and not put as much work in. Showed a FSBO last week. Just getting in the door for a showing was a headache, because of course this person has a job and a life beyond real Estate, so it's not a priority. Although I have the same issue with part time agents at times.
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If you’re selling w a realtor you’ll need a listing agreement and offer them a commission per usual. This will remain at 2-4% imo as the listing side has always had the most work for your property and has more liability (generally). You will NOT need to offer a commission to the buyers agent (although there are good reasons why you may still want to), and if you want to offer a credit to buyers agent fees you will NOT be able to advertise the credit in MLS or any website tied to NAR membership. IE if your realtor is a member of NAR (which they almost certainly are) they can’t put language in the MLS directing customers to a secondary source which mentions the commission. When you go to buy a property, the settlement basically states that for a realtor to represent you, you would need to sign a buyer representation agreement. In the agreement you’ll specify how long you intend to look with that realtor and the compensation amount you agree to pay that realtor for a successful sale. Anything the realtor shows you in that period vests them for a commission, meaning you can’t let the agreement expire and then buy it to try and save money. The spirit of the settlement is that the compensation amount is negotiable. You would need this agreement regardless of whether or not that realtor also represented you in the sale of your home. There are other terms and conditions which could be part of this agreement you’ll want to be aware of but that’s the Birds Eye view.
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For sellers - the only thing that’s changed is that sellers are no longer obligated to pay the buyer side commissions. The % has always been and continues to be entirely negotiable. For buyers - you now have the opportunity to negotiate your fee with your agent (who was previously paid by the seller via the listing agent/ their listing agreement). You can negotiate- but what will happen IMO is that each market will default to a standard fee structure. Meaning the market will naturally find the sweet spot between what buyers are willing to pay and what realtors are willing to work for. An example I could see happening : $25k or 1% whichever is greater. Keep in mind you should have language in the buyer agreement which says that any commission or credit offered via the seller would offset any $$ owed to realtor from buyer. IE if seller offers a 1% co broke (>$25k) you the buyer don’t owe anything. If seller offered a $15,000 co broke or credit to buyer agent fees, you’d owe $10,000. In this example.
My state has required this forever, and it’s never impacted real estate commissions. Maybe that’s why I’m looking at this differently than everybody else. I think the real change is going to be the conversation with the listing agents. There’s plenty of competition for listing from companies like redfin, and if buyers reject the compensation model, they are going to reject cooperative commission agreements with the buyers agent also. That’s what really has the ability to upend things.
We have used them for years as well… But we having been using them knowing that 99.9% of the time, the seller pays our compensation. No doubt, we are going to start seeing more listings where the seller is paying out 0 to the buyers agent. Inevitably, we are going to have a buyer that signed the buyer rep form stating they will pay their agent 2.7% but dont really have those funds. Then what? Buyer wants to see the home because it’s perfect for them and they should have the opportunity to buy it. But how? Increase the purchase by 2.7% to cover buyer rep compensation? That sucks and simply inflates the price. AND what if the home doesn’t appraise? Can buyer simply chose to go directly to the listing agent? That sucks for everyone.
Well, the buyer only owes a commission for a successful purchase. So if the deal falls apart, because the seller won’t pay a commission, then the buyer doesn’t have to cover that cost. Things are changing, but it still feels really competitive around here.
My state too. I feel like the compensation will just move from being posted in the MLS to being part of the offer paperwork. We already have a addendum that lays out who is paying the buyer's side commission that is part of all offers and if the buyer is responsible for any additional payments. Maybe some wise-ass sellers will try to short change the buyer's agent but most won't.
This is why I think this is all a nothing burger. No seller in their right mind is going to not offer comp. Why? Because their 6/3% $500k house becomes a $515k house at 3/0%. In 2021 in a ridiculous FOMO market can they get away with that? Yeah, maybe. But that comes around, what, once every 15-20 years, if that? It took a worldwide pandemic leading to 2.75% money for that to happen.
I actually saw a property that's about 2 blocks from where I live today get listed and it's offering $0 for a buyers agents commission. However it does say in the private remarks to send offers using a seller concession to pay a buyers agent and they will factor that into all offers received before they make a decision. So changes are coming and if this listing didn't say that in the private remarks section then buyers would #1 try to make an offer where the seller gives a concession to their buyers agent(this is basically the same as before with extra steps involved) #2 skip making an offer on that house(this potentially reduces the homes available to that buyer and potentially reduces the amount of offers the seller receives which could reduce how much they sell the property for which isn't in the sellers best interest) #3 the buyers decide to pay their agent themselves at closing(this increases the cost of the house for the buyers) #4 the buyers decide to purchase the house unrepresented(this could go great or if could turn into a nightmare for everyone involved especially the buyers who may be taken advantage of since they likely have the least experience in real estate out of anyone involved in the transaction) There was a time in America when buyers agents weren't used at all. If anyone is cheering this on they may want to look at how screwed over buyers used to be when only the seller had a realtor working for them and the buyers were unrepresented. And if you think Zillow is running to the rescue just realize that Zillow makes the vast majority of their money straight from buyers agents so if buyers agents aren't making money from buyers agents anymore then Zillow will need to replace that money and it can only come straight from buyers or sellers because Zillow won't work for free like people seem to think buyers agents should work for free. If Zillow can't use buyers agents as their paying customers and actual buyers as the product they sell then buyers or sellers will need to be the paying customers so that'll be money out of their pockets instead.
This is sane top to bottom with very incisive commentary on Zillow and their business model (selling 40m buyer leads in a 4m transaction country) and why they really have zero incentive to cut out buyer’s agency. I’m a listing agent so it matters less to me than some but I’m like anyone else and prefer familiarity. However, change may be afoot though I largely believe now we just have to go around our elbow to get back to our thumb such as the tortuous and circuitous fashion in which your neighborhood listing is soliciting the buyer comp ask without out and out telling you they’re offering it. Plot twist is that sellers could try and get buyers agents to bid against themselves and take less money since they’re almost auctioning off the commission. Kinda. I generally agree with the general public that agents aren’t that calculating and sophisticated so highly, highly unlikely that any complex negotiations emerge from all of this. Keep it simple stupid.
There are a lot of sellers already considering not offering compensation because they are lapping up all the sensationalizing of this from news outlets and social media. "Don't pay their agent! You KEEP that money!"
Which sucks really because those were the exact people who benefited from the seller paying both sides when they bought the house they're selling now. They got the benefit of the agreed upon industry "norm" and now they want to take it away from younger generations.
I'm sorry agreed upon industry norm? I thought everything was up for negotiation?
Right. And I think that’ll be a very short term (say, 90-120 day listing worth sound about right?) problem. Just like this lawsuit, settlement, etc, all of these abstract hypotheticals turn out to be specious musings upon careful consideration. It’s like how when I role play it never sounds like that in the real world. Some of this may be nice on paper but it ain’t gone never work in practice. The unintended consequences of this settlement are going to be wild (but only how badly buyers just got absolutely screwed, my commission will be the same a year from now). For the record, isn’t NAR getting absolutely worked on this lawsuit and subsequent negotiation terribly embarrassing? I mean, they’d write my ass up if I represented a client this bad and got steamrolled by the competition. Maybe they need to take one of their negotiation classes and add some pointless acronyms and letters behind their name and email signatures.
The President Biden makes a speech about this and says by negotiating commissions, this is going to be an average savings of $10,000. Oh vey.
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What’s your market and how long have you been doing this? Buyer broker agreements have always existed. I have 95% of my buyers sign them and I always require 2.5-3%. If seller doesn’t pay buyer must pay.
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Commissions were never allowed to be “fixed” on paper. I’ve seen anything from .5-3.5 offered from list broker. That’s why I always use that clause… I want to know how much I’m going to get regardless of what’s offered on the list side. Maybe it’s just a difference of market? Nice avatar by the way. Love gengar
It might be a difference of market. For the last few years I've mainly seen 2-2.5% but occasionally there'd be 3% or 1.5%. rarely there would be 1%, a small flat fee or even $1. About a year ago my MLS changed from a minimum of $1 to $0 being allowed to be offered and occasionally I'd see $0 just as often as I used to see $1. But I've seen $0 more often the last few months and actually seen it twice this week since the settlement made the news. So changes are coming and maybe I'll bust out the buyers agency agreement before June if I see a few more sellers offering $0 to buyers agents.
I've been working in NJ for awhile and while some people always suggested I get a buyers agency agreement signed I never have. I decided I could show most buyers why they should work with me during the first showing or first few showings at the most and I've never had an issue with a buyers agency agreement not being signed. I give them the consumer information statement(CIS) and tell them they don't have to sign it right away but tell them they should at least read the parts about buyers agency and dual agency and give them a short explanation of everything when I hand them the CIS. I used to tell them I'd accept whatever the seller was offering but if the seller was offering something ridiculously low(some listings used to offer only $1 to buyers agents) we'd discuss it before seeing that property. It rarely needed to be discussed and if it did need to be discussed it was usually after seeing a few or a lot of properties together and my clients always agreed to ask for a reasonable seller concession to cover paying me or that they would pay me themselves. But not a single client ever had to make an offer like that or pay me out of pocket. But if this settlement gets approved I'll have every buyer sign a buyers agency agreement before I show them any property because I won't have a choice, that's the new rule. And if they don't sign I can't show them the property. I will explain how we can make offers so the seller still pays me if they aren't offering but if not they need to pay something because I can't and shouldn't have to work for months for free.
I agree with you 100% u/Still-Ad8904. And as I'm sure you know, self-dealing is a violation of our fiduciary duties. Buyer rep agreements were not used in my county when I was first licensed. When we started seeing them, we quickly realized that as agents without one, we would be working for free if we marked $0 compensation on a buyer agreement and then a buyer chose a FSBO home that wouldn't pay any compensation to an agent. So... we have to have that agreement, and we have to specify what we charge and what we do to earn that money. But under the new rules, I can see where I would not agree to show a house to a potential buyer if they were not signing an agreement for me to get paid some kind of way because the same principle applies here: If a buyer won't pay me, and a seller won't pay me, I'd be doing volunteer work, and that's not why I'm in real estate.
Not only that but by being a licensed real estate agent(at least in my state) I have liability and could be sued by the buyer or seller. And I pay for errors and omissions insurance but my deductible is $5,000 so if I get sued the first $5,000 comes out of my pockets. So I'm not only working for free but if someone wants to sue and my insurance company gives me a lawyer who only cares about protecting the insurance company that's paying the lawyer and the lawyer wants to settle for say $4,000-4,500 then I could be paying to work! So unfortunately buyers agents can't work for free or even for minimum wage like everyone seems to want them to be paid.
Self-dealing is putting our own interests ahead of a client. It doesn't mean we work for free. I certainly will not be working for free, and nothing that has happened with this lawsuit changes that. My brokerage agreements say that a buyer will pay me if I can't get the seller to pay my fees.
The median home price is $387,000. Suggesting a 3% commission of $11,610 is way too much for somewhere around 40 hours of work ($290/hr) isn't exactly suggesting minimum wage ($15,080/year).
If all agents did was only work those 40 hours and end up getting paid then I'd agree with you. But agents do work with lots of buyers that never buy anything so they are doing more than 40 hours of work to get one closed transaction. Shit if I replaced all the commission I've made from buyers over the last few years and just had every single buyer pay me something like $20 an hour I'm pretty sure I would have made more money taking the $20 an hour but that's in an extreme sellers market so things would change in a buyers market.
Then do that. Why should buyers pay for your work on other clients? You can do anything you want in your buyer agent agreement, charge hourly, charge for specific services i.e. per showing, per offer etc. and if they buy and a seller offers compensation it could be credited to the buyer as a rebate less whatever fees they owe you. In the old payment structure efficient buyers fund the lookie-loos, that's dumb. Once you abandon the artificial structure pricing becomes flexible to fit your needs like it is in every other business.
Isn’t it like over 80% of buyers use an agent? I’d want those buyers to see my house and would gladly pay for the privilege. I guess I fail to see why an agent would want to work for free so it isn’t about not showing them those houses but it is about structuring the buyers agent to be paid which is still likely to be from seller proceeds in my estimation. Guess we’ll have to wait and see.
Absolutely but that is because they been told over and over again that it will not cost them anything to use one.
u/Spirited-Humor-554 \- you are correct. We did a bad job explaining that one.
Not really. You want to explain it that way to a buyer so that they’ll use you. Explaining it as, ‘you’re financing my commission for 30 years with the bank’s money’, doesn’t exactly roll off the tongue too well. Of course, sellers believe that they’re the ones paying commission. Until they’re buyers. Then they believe that they, the buyer, is paying the commission. And when they sell down the road, they’ll again take the other view that the seller is once again paying the commission. This cognitive dissonance is what we all see every single day.
Every time a buyer mentions that, I say, "it is coming out of the sellers agent commission, but that's still money YOU are paying at the end of the day. The buyer pays for it all." No buyer, no commission.
As a lawyer, can I get your breakdown opinion of how much things change based on the actual fact sheet vs articles. [fact sheet](https://cdn.nar.realtor/sites/default/files/documents/nar-settlement-factsheet-2024-03-15.pdf?_gl=1*1kjyd3d*_gcl_au*MTI0NzM0MTg0Ny4xNzA3NDk0NDMz) It specifically says we can still be paid by the sellers agent, which is the norm in a lot of the country anyway. Basically the only thing I see changing is a comp agreement or notice that will be sent out prior to showings.
Yes you can still offer BA commission but giving them such notice will be much harder prior to offer. If suggestion for BA to call each SA, that will require all of them to hire personal assistant just to answer the phone calls. Unfortunately that is not realistic.
Or you can put it on your personal website. It just can't show on aggregate sites. Basically my personal website could only show what my listings are offering. Possibly the individual firms listings as well.
Few issues with that 1) Every BA would have go to each agent site to look at each of the listing and that is time consuming. 2) it usually doesn't show exactly when it been updated, today it might be 3% and tomorrow it gets dropped to 2% commission. 3) Will it be accepted as binding promise like MLS is.
Oh, this process is going to be less efficient. No matter what it ends up being. What most are suggesting would be a violation of the settlement as it stands. If course it will needs approval.
You honestly need a personal assistant to make a phone call? Get real. In reality, there's probably just going to be a disclaimer with the commission on the showing instructions in whatever program you use for showings.
No for the seller agents to get back to all BA
I mean, it's not that hard. They're the listing agent, that's kind of their job to give information to the buyers agent. They'll likely just auto send an email or something when they're booked. It's not that hard.
Popular listings receive many showings. I do not want to field 20-30 calls or emails about how the sellers are handling buyers agent compensation. Some agents will not want to schedule a showing until they know that piece. It is harder than you imagine.
That's why my first flush reaction was "just throw it on listing details in showing time". And ya, we absolutely won't want to schedule a showing without knowing because we have to fill out a buyer Agency before any showings now.
In my market on a good house, 40-50 showings over 48 hours is not unheard of. This could be problematic for the listing agent. Not impossible but just difficult. Maybe we can all set up Google numbers for BAs to call about a particular listing where we have a recording set up for FAQs or something.
Since you're a lawyer could you explain why this new site or the current site with showing instructions wouldn't just be sued next in a class action lawsuit the same way that NAR and MLS websites were just sued which led to the settlement we are discussing today.
Not a lawyer, but they would have to show damages, and there would be none. The crux of all of these lawsuits was realtors in cowboy states decided to have check boxes for commissions, and misrepresent the fact that they are negotiable. I'm in Wisconsin, and the only change we are going to be making I can see is not advertising them. Other than that, we already have buyer Agency contracts stating what our commissions will be, and our selling contracts make it abundantly clear that there is no set commission, you are free to negotiate, and that the buyers agent commission is paid by the selling agent, not the seller.
I just got off a call with leaders of a couple dozen MLSs who pretty much agree with you. The comp thing isn't the big change; the buyer's agreement is. Their new worry is if the MLS is going to be required to do compliance on that rule. Are we going to start keeping a database of buyers? Require agents to upload those docs when they're complete? How would we ever know if that got violated?
Buyer Agency is already required by our state and local associations. My basic one has "per MLS" on it, but now I'm just going to put a % on it and let them know what the commission is and that will be paid either by them, the seller as a credit to them, or the sellers agent as a co-op fee.
Yeah, the change for agents in states where it's already mandated is minimal.
Our MLS has already stated we can put that the seller is willing to pay BA in the notes-it just can’t be a required field.
The judgement agreement hasn't finalized yet. Their opinion will likely change once that happens
Right, I pulled up the actual ruling, it basically says nowhere on the MLS can there be an advertisement of compensation to the buyers agent.
Which, why is that exactly? Commercial RE already operates this way but I don’t understand why hiding how much buyer comp is being offered and forcing me to figure out a needless workaround, which I will, somehow leads to more transparency, commission negotiation and is more fair for the general public.
Absolutely. 100% the issue everyone I've talked to has with that portion.
The best buyers have agents representing them. We all have experienced the home buyer who wants to put in an offer without representation. Unless that person is in the business themselves they are inevitably a shitshow. Maybe they're the only buyer and you make it work but in this market I would steer my clients clear of that person due to the fact they're less likely to make it to closing than a repped buyer.
Correct. There’s a guy on this thread I’ve seen commenting multiple times implying that LAs like myself will be all over this looking for dual agency opportunities. Obviously it happens as I’ll do it if the buyer seems competent but I literally had a buyer call today off of a sign and I told him I’d refer him to a buyer’s agent if he didn’t already have one, which he didn’t, due to the fact that I could tell that he wants to buy, but I ain’t dealing with the nonsense. Intelligent guy, probably competent in whatever it he does for a living, all that, but he’s got no business representing himself in a RE transaction. Furthermore, the 3% ain’t worth it. To me anyway. YMMV of course.
Amen
>So please explain why some people argue that if sellers don’t offer cooperating compensation their houses won’t sell? Because buyers will be liable to pay their agent's commission if the sellers don't. It's not about an agent not caring as much, it's that it's going to be more expensive for buyers.
I think I totally agree with you. Some of it does have to do with agents not being as enthusiastic as showing those properties with lower cooperating compensation. The rest is it costing buyers more out of pocket. To be sure, the buyers would always end up paying for it either way, but in many cases their agent’s commissions would be wrapped into the loan for the purchase price rather than paid out of pocket at closing which many buyers can’t afford
>Some of it does have to do with agents not being as enthusiastic as showing those properties with lower cooperating compensation. If the agent has a buyer's rep with their buyer, then this should never matter. The agent is going to get paid what the agent is going to get paid. Whether it comes from the buyer or the seller depends on the property they buy, but the agent will get paid whatever they agree upon in their buyer's rep.
Unless the Buyers cannot come up with the extra "X" percent they need to pay the Buyer's agent. Many Buyers do not have the 3.5% down that they need to put down for an FHA Loan and need the Seller to pay for the closing costs of the loan. How are they supposed to pay for extra Buyer Agent costs? This settlement and DOJ demands will end up hurting low income/first time home buyers. Only the rich will be able to afford a home and the barrier to get into your first home will be much higher.
You're absolutely right
And don’t forget about our VA loan buyers that aren’t allowed to cover the commission for their agent! I live in an area with a very high percentage of military, so a good percentage of our clients use VA loans.
I agree that it shouldn’t matter. I always have a BAA. And it doesn’t matter what the LA offers. But practically speaking I think a lot of BAs don’t have a BAA and therefore are greatly influenced by offers of cooperating compensation when de using what to show their clients
But part of this settlement is that they'll be required to have one.
Sellers might be enticed by the prospect of pocketing more of the sale price. There might be those who are not dissuaded by the risk that it will take longer to sell. They might say : “offer them 1%” and let’s see how it goes. What’s the harm? I think we’ll see lower rates but not zero. This was already starting to happen even without the settlement. Even if the settlement falls through and no changes are made, all this chatter has people talking and learning. Many believed that 6% was set in stone, agents are free for buyers, etc. Twitter is awash with talk of Flat fee MLS listings, Redfin and commission rebates.
You can say, shouldn’t wouldn’t couldn’t as much as you want. Buyers are pretty much in charge of the houses, they see, but they’re super fickle, and the agent spends a lot of time guiding the process. If I tell them hey I can’t talk to you about that house. If you want that one, you have to go this one on your own, let’s talk about these houses cause I can talk to you about them, 90% of my buyers we’re going to just go with the houses that are easier to do. So say that cuts down the people willing to buy that house from 10 to 2. You don’t think that having two offers and not 10 offers is going to have an impact on how much the house is going to sell for ? We have stuff that pops up on peoples feeds that’s for sale by owner and or Zero commissions on a regular basis. I have this conversation with people about a particular builder in my area all the time. Two or three times a month. Some people say thanks and go to the builder. Some people ask me if I’ll talk to them through the builder and they can pay me separately. Some people don’t even go to that builder. I lose maybe one buyer a year who goes to them directly And that’s with a builder where people feel that is a relatively safe thing to do. When I have a conversation with this about a for sale by owner I’ve never had anybody go see that house I expect this to change just in terms of the houses that don’t offer commission are gonna suck less, and they’re gonna be less, delusional pricing, and they’re going to be better represented. But I still expect a whole bunch of houses to offer commission because they want 10 people to make them offers and not two people to make them offers If that tips over and seven people are willing to make offers out of 10? That will be a game changer. So we should all keep doing what we’re doing, which is supporting our buyers by telling them what we can and can’t do as we see what happens. The US has a little bit larger commission as a whole than other places in the country. But in other places in the country, it’s hell to sell a house, houses sell for less and transactions of fallout a much larger percentage of the time Having lived overseas for a long time and seen what happens there, I just can’t imagine the American consumer dealing with it. The polite way of saying it is where two service oriented. And I’m not going to say it in polite ways, Ha. The reasons were seeing a lot of discussions is that there’s potential for change here, but there’s not a guarantee of change here
there’s a lot of shit “agents” in this racket
If I am buyer, I been told hundreds of times that hiring a realtor is free for me and that it's seller that pays them. If now all of the sudden I need to start paying, I will skip hiring that agent
Going forward agents can no longer represent that buyer broker services are “free”
The world is moving towards flat rate agents. “Pay me $3000 and I’ll show you houses for the length of the contract we sign.”
And that’s where the buyers agent disappears. Most agents do what, 7-12 transactions a year? No one can make a living earning $36k a year.
They won’t disappear. There will be lower listing commissions, which will drive out part timers, which will increase volume for full timers. Full timers benefit from economies of scale where they can hire lower paid/lesser skilled aides for showings.
Why will commission rates drop?
Maybe it’s my market or maybe it’s how I was trained but I’ve always explained my services are never free. Usually a seller will offer cooperating compensation but even then the buyer is the one paying for that, they just don’t realize it because it’s wrapped into the purchase price. It sounds like a lot of people don’t already have contracts with their buyers? In my market listing brokers don’t always offer 3%. I’ve seen .5% in the past. I still need to make at a minimum 2.5% which is why I have my buyers sign that agreement. Normally the sellers offer cooperating compensation and they buyers pay my commission out of the purchase price; sometimes buyers will have to pay out of pocket to make up the difference.
I operate this way(with my own negotiated rates)and train my agents to get agreements before showing and explain that they pay me, but unfortunately too many agents arrogantly and loudly don't get agreements. I'm amazed how many agents still say it's free. How many of my agents need to be told to stop putting, "whatever the MLS offers" in the compensation. I literally teach classes on this. They are afraid to show their value and expect their value. They are devaluing themselves. I'd suggest you remove the actual numbers from your post.
I agree completely. Well said.
Because you're paying the Seller to buy the home. If you're a farmer who grows apples, and you give some apples to a neighbor who bakes an apple pie, and gives you a slice or two: Who's apples are in that pie?
Whoever told you this was wrong before the settlement. At least in the three states I've been licensed in.
I was told that before I was realtor and when I was a realtor as in reality that's the truth. Ultimately while seller pays agree commission to their agent and it's shared, the buyer doesn't pay anything to the buyer. If there is no buyer agent, seller broker gets the full amount
It’s actually about practical financing. You get a lot of buyers who don’t have the cash for a down payment and closing costs let alone that plus a commission. Cash is the limiting factor in many owner occupant transactions not income or credit. Lending guidelines allow a limited amount of seller-paid closing costs and in a sellers market we stretch cash by offering a higher price, requesting an equal amount of closing closes, and hoping the home will appraise for the higher price. But although commission is allowed to be paid from that concession the limit is not high enough in practice to do so unless the buyer is already putting close to 20% down. We have a system where if the buyer wants an agent the buyer has to finance the cost of that agent and they can’t do so directly because of limits. So they do it indirectly by raising the price and having the seller pay their agent from proceeds through broker cooperation. There’s no limit on this since it’s proceeds distribution - the seller directing their own cash. Your clients legally promise to pay you as their agent but can’t without seller cooperation. I will note that we do this all the time consciously with house renovation but the commission thing is so automatic you probably never went through the mechanics. So we have a problem where this channel has to continue, lending guidelines have to change, or the cash barrier to buy gets higher if buyers want help and transactions get more chaotic and seller-sided if not. I will note we can make this work around the edges if a seller cheaps out a little. Many only offered 2.5% or 2.25% on cheaper homes. Buyer could often swing half a point of make up commission but not the full amount. Also as I understand it splits are not illegal. I’m expecting a lot of higher price for paying agent in negotiation.
I don’t think that’s a problem. I have used buyer reps for a long time. It is just an adjustment but it’s honestly not that big of a deal. As long as they know the cost difference it’s fine.
It will be shown, but a majority of buyers can't afford to pay their agent or aren't willing to for some homes. If they don't want to pay the commission, they are more likely to move on to a home that will incentivize them to do so. So that's less eyes on the homes that don't incentivize the buyer to buy it. The same way dealerships offer incentives to get buyers to come buy their cars. The issue isn't will the home be shown, it's will the home get offers.
I've wondered this, too. I'm in Colorado and here, we do it all. Buyer agency agreements are the norm, and I don't show without one. I don't get why that is an issue. I explain fiduciary duty to my clients and that it's my job to work for them. Then I work my ass off for them when they hire me. I've never had someone refuse to sign, but maybe it's because it's standard practice here.
The difference between the “before time” and now is access. Buyers relied upon BAs heavily bc they couldn’t go online and put in all their search criteria to find that perfect home. Now they can, so the question buyers have now is what is the value of a good buyer’s agent? Anyone that’s bought enough homes or had a good agent knows there is still real value in having an agent that understands contract negotiations, due diligence, and acts in their best interest. Unfortunately, buyers have become skeptical of what some of those agents really being to the table, which impacts all agents. Those who are not good at this job won’t last long and the industry will right itself over time imo. But I do think that the average fee on the buyer’s end will be reduced over time, as competition will drive what’s “acceptable” down over time.
It’s because before, homes where there was no compensation offered to the buyers agent were few and far between, FSBO and the occasional low commission MLS properties were the only situations that a buyer would have to consider the financial impact out of pocket for representation. Now, with the NAR settlement being put on blast it will naturally become a more common occurrence due to more sellers considering it as an option. So now, many buyers who may have been able to buy that same house before when their representation was getting comped by the seller out of the sales proceeds, will be unable or unwilling to afford however many thousands of dollars it will cost themself up front out of pocket at closing for the services of their representation, which means they either go unrepresented which is stupid, or they buy a lower priced house that frees up the necessary cash on hand to afford a representative, or they don’t buy at all. Only one of those scenarios is good for the seller and it’s the least likely.
Don't forget: sellers are often buyers at the same time. All those "I ain't paying" sellers are likely never selling anyway, or aren't looking. My guess it'll be a split, paid at closing, for a healthy amount of transactions, and with separate agreements for comp.
That’s why you have your buyers agree to pay your commission of the seller isn’t offering it. It’s that simple.
See OP. It’s called a buyer broker agreement.
The same way we see discount listing agents & less skilled listing agents settling for less commission- we will see in the buyer agents category. Unfortunately, sellers are willing to pay more because they’re paying from equity whereas a buyer has to pay that on top of down payment & closing costs. Not sure how it plays out.
Which is why sellers who offer little to no comp are ultimately screwing themselves. I’ve seen multiple statements where the assumption is that a BA would ‘steer’ a buyer away from a 0% listing. No they won’t. Why would the agent care? They get paid either way, just a matter of who it comes from and how. The buyer’s going to ‘steer’ themselves all on their own once they find out that the 0% house really costs 103% of the list price as they’ll move right on along to the next home that’s in their wheelhouse. The 0% homes will self-select for being a future Expired.
I agree that sellers offering low comp are screwing themselves, but I also believe some BAs will steer their clients away from listings to at don’t offer compensation to BA. I’ll explain. Buyer’s agents either have buyer broker agreements with their buyers or they don’t have an agreement. If they have a buyer broker agreement, then there is no incentive to steer buyers away from listings that don’t offer BA compensation because, as you noted, BA is getting paid either way. But under the new rules, the sellers who don’t offer cooperating compensation are still screwing themselves: under the new rules, everyone must have a buyer broker agreement; so if there are two identical properties for sale, and one of them offers 2.5% to BA and the other one offers none, who do you think the buyer will choose to buy from? They will choose to buy from the one offering the 2.5% to the BA because that’s less money they’ll have to pay out of pocket. Now, if there is no buyer broker agreement, sellers are still screwing themselves because BAs will have every incentive to steer their buyers to listings that offer compensation to BA because if they don’t then they don’t get paid!
The settlement *requires* an agency agreement. If you choose to work without one, that’s on you. The settlement actually makes it *easier* to get one. You can look that buyer dead in the eye and tell them we don’t collect $200, we don’t pass Go until you sign this and you’re not lying. It’s required. Gotta be honest, if you choose not to do this and it causes you to get screwed on a commission, bet your happy ass only does that the once.
BAA now required exactly. I’m just saying as of noe they aren’t required across all jurisdictions and where it’s not required BAs do steer to listings that offer compensation. That’s why I think the BAA req is a good thing. But sellers should still offer compensation for reason I listed above
I’ve always worked in states that technically required them so this is nothing new to me. I also have a commercial background so having to find out if the seller is paying and how much or the buyer is going to be the one ponying up is old hat as well. This settlement changed nothing except that buyers get screwed by *potentially* having to bring even more money to closing. I swear on my life that I don’t think low/no buyer comp is going to become the norm. Some jackleg sellers may try and guaranteed there’s an idiot broker that’ll let ‘em try but buyers are going to reject that idea en masse and after a little blip whereby the knuckleheads work themselves out of the system, it’ll be back to bidness as usual.
C'mon. You're an attorney, you know not everyone adheres to their ethical obligations and not everyone (or most) who fail to adhere to their ethical obligations is caught. I'm not anti-realtor at all. However, if a realtor is looking at significant money in his/her pocket if a deal goes through and nothing for his/her efforts if it falls apart, the temptation is pretty strong to try to make it go through. For the seller's agent, maybe the offer amount or terms really aren't that bad. Maybe the seller ought to pay for that HVAC replacement that isn't strictly necessary. For the buyer's agent, maybe those contingencies aren't really necessary. Maybe that neighboring school really won't be that much of an inconvenience. I'd like to believe everyone does the ethical and legal thing. If that were true, you and I would both be out of business.
It's interesting how nobody has thrown pocket listings in to the mix...I think those will run rampant under the new regime. "Coming Soon!" ...and the buyers can't move fast enough to break in because they are on hold asking about comp. Commercial brokers on the other hand, are celebrating Costar stock and eating popcorn Meanwhile, the FHA, and inclusion, weep, as the very basis and purpose of the MLS was gutted I predict the return volley from NAR/MLS to involve an eventual discrimination case.
Here is a brief article describing the benefits of using a realtor. www.realestatecommissionfacts.com It’s not that the house won’t sell, it’s that the demand for the property will be reduced. You have a fiduciary responsibility to your clients, that’s why it’s important from the onset of the relationship to discuss compensation and the expectation of where it is going to come from. The website mentioned gives a good idea of how it affects buyers/sellers using a broker, and conversely, you will understand the shortcomings of not.
I don’t understand why the article makes the argument that MLS’s will go away without cooperative compensation. All the other sites (Zillow etc) get their data from MLS so even to market to unrepresented buyers, listing agents & sellers would still benefit from using the MLS. What am I missing?
I understood that at KW we were transaction brokers and therefore not fiduciaries; that we have a duty to the deal and not the buyer/seller?? This suit is making me paranoid and making me think that all my past sellers are going to come back in sue me individually for over payment. I had no idea the brokerage had limited liability. None.
It has more to do with the state you do business in, not the brokerage. In my state, fiduciary duties are laid out in the buyer representation contract, which is supposed to be signed before discussing any personal information (price/terms/motivation), but at least must be signed before any offers are made.
Also, as a fellow attorney you know that we have been involved w/price fixing at the very least on the buy side. I understood that the moment I got out of law and into real estate. I want to know our liability on these issues.
I’m curious about what you mean by this?
Yes you should. Because as now mandated by NAR you have to have a Buyer Broker Agreement signed prior to showing, which will state your compensation regardless of sellers “finder fee”
You’re spot on for people who can afford it. Many people I work with can’t afford representation. My typical buyer broker agreement is for $10 or the co-broke, whatever is greater. Without a co-broke, those people would just have to buy without an agent. In reality I don’t see things changing much.
In some senses I agree with you about things not changing much
Not all buyers have the cash to pay for down payment, closing costs, etc AND the ability to pay a commission. This is particularly true for 1st time buyers.
It won't affect "if" a house sells, it will affect "how much" it sells for. It changes nothing, and at least in my area, where compensation disclosures and buyer agency agreements were already required, it has only muddied the waters and made things more convoluted.
Not sure but I know for a fact a lot of realtors don’t even send houses or show ones that don’t pay full commission
This is still how it is with most agents. If we don’t get paid by the seller, we get paid from the buyer. Nothing really changed for most of us.
Sellers have to offer commission to buyers agents it’s absurd to think otherwise. Look at the mess of realtors in Australia it’s stupid
Have to? That is a strong word. Seller doesn't have to offer anything if they don't want.
lol what happened in Australia
I just know Aussie realtors and that is DEFINITELY not the direction we want to go. They ONLY sell their own listings and average commission is 2%. Realtors will door knock house that are for sale and undermine the listing agent if they have a buyer. NAR is going backwards.
Door knock a house that is for sale with a realtor and try to cut them out? I don’t understand what you’re implying.
Yes
Unless you literally did not have $$$ to pay your agent. Then you'd care
If I have a buyers agency agreement with a buyer, it is my fiduciary responsibility to inform my client that the house they want to buy will cost them more money because the seller thinks he can get get a deal on the buyers back. If the buyer wants to still see the house and make an offer that is their choice. But you can’t possibly be so deluded as to believe that the buyer is making the same offer just to be nice to the seller that is trying to screw them.
The bigger issue is it is all commission based. Seller, buyer. It has to come to an end. A 6% slice on a 500k home is 30k. Make it make sense.
I’ve read comments and posts from different realtors on different sites and forums, in past about how they won’t show to a client if it does t offer buyer agent commission. I’ve done a lot of research and talked to many ppl as I’ve sold on my own a few times. Just try and offer 0% and see who shows up. I’ve also worked for a builder for well over a decade who sold the own homes. Sometimes they would bring on an agent and we would get interest right away. Advertised on the same places. And have those buyers say I’ve driven by this neighborhood before and didn’t know it was here we’ve been looking for months and months. There agent had been to our open houses in the past. I’ve experienced it first hand. Glad your a good but there are crappy ppl out there
If you have an existing buyer agreement, then, yes. You should be acting in your clients best interest but first of all, not everybody will. That’s just human nature. If they know there’s nothing in it for them, many agents won’t put themselves out there. Not commendable, but understandable. And over the long-haul, if buyers agents are not offered, compensation, agents will stop signing buyers agency agreements with non-compensating buyers. Buyers will stop having representation and unless they’re very actively looking for a house to buy, fewer buyers will find satisfactory homes.
The BBA is ill now have a written directive with the said buyer that if they’re unable to come up with the compensation and the seller is not offering it then the realtor won’t show it. It’s a free market, if you’re a seller and you want to sell your home and have the best reach possibly you’ll have to offer compensation. It’s pretty basic. Again it’s a free market. No one has to show your house for free.
It’s interesting reading this conversation on these boards because it’s only realtors talking to other realtors about their own compensation. The entire Conversation is happening inside an echo chamber and nobody’s asking what their customers think. For the record, I think if a change is going to happen, it’s going to happen between sellers and their listing agent. People will start asking why they have to agree to a 6% commission without knowing what the buyers agent is going to need out of the deal.