If buying or selling a house has been on your mind, it’s possible you’ve seen the NAR (National Association Of REALTORS) Lawsuit in the news. Google ‘NAR Settlement’ and there will be no shortage of links for further review. In a nutshell the lawsuit came about due to lack of transparency in how real estate agents are paid. We can’t blame consumers for being confused IF they have been working with realtors who fail to explain the process and costs associated, or if they’ve just never bought a home. There is NO standard or set commission – they have always been and will continue to be negotiable. While there have never been any standard commission rates or structures, there have been practices common throughout the marketplace on listed properties. Generally, when a seller lists a home for sale with a listing broker, they agree to pay a total commission to that listing broker at closing upon the successful sale. Of that total commission, oftentimes the listing broker would offer to share a portion of that commission with a buyer’s agent representing the buyer who made the purchase. These terms are agreed to in a listing contract. So, as a home buyer, oftentimes you have not come out of pocket directly to pay your realtor, but rather your realtor is getting compensated from a portion of the listing agent’s previously agreed upon compensation from the Seller.
What’s in question here were three things: One, the lack of transparency to a buyer on what specifically the buyer’s agent gets paid. Two, the fact that a buyer’s agent could steer their buyers to only look at homes offering higher commissions. And third, that the seller didn’t have an option as to whether a cooperating commission was offered.
Effective August 2024 the real estate industry made changes which affect Buyers & Sellers in several ways. Here is a breakdown:
Offers of cooperating commission are no longer allowed to be communicated through the MLS. Cooperating commissions can still be offered and paid by the listing agent, a buyer’s agent can be compensated by a seller as part of a deal, or a buyer can compensate their agent directly. (The ONLY thing changed here is the fact that co-op commissions will no longer be displayed on MLS. Everything else was already an option previously.)
A buyer wishing to ‘work with’ a buyer’s agent must have a signed Buyer Representation Agreement prior to viewing ANY homes. This is a good change. It’s going to force the conversation up front of what services a buyer’s agent provides and how they are compensated. It’s going to require both parties to agree to the compensation up front.
WHAT DOES THIS MEAN FOR SELLERS?
You still have the choice of offering compensation to buyer brokers. You may consider doing this as a way of marketing your home or making your listing more attractive to buyers.
Your agent must conspicuously disclose to you and obtain your approval for any payment or offer of payment that a listing broker will make to another broker acting for buyers.
This disclosure must be made to you in writing in advance of any payment or agreement to pay another broker acting for buyers, and must specify the amount or rate of such payment.
As the seller you can still make an offer of compensation, but your agent cannot include it on a Multiple Listing Service (MLS)—MLSs are local marketplaces used by both buyer brokers and listing brokers to share information about properties for sale.
Your agent can advertise your listing via off-MLS platforms such as social media, flyers, websites AND advertise any co-op compensation offered if advertising on their own website, social media platform and/or any property flyers distributed.
As the seller you can still offer buyer concessions on an MLS (for example, concessions for buyer closing costs).