Commissions Lawsuit Rule Changes: What Agents Need to Know

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Thank you for your patience. You may have noticed that we haven’t posted in a while. The team at Brokerbuzz has been busy behind the scenes making sense of the new commissions lawsuit landscape - it is our belief that this will have a significant impact moving forward and it is our goal to help provide content that brings thought leadership, guidance and clarity to this new chapter in the world of real estate. 

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The real estate industry is on the cusp of significant changes, stemming from the ongoing commissions lawsuits and the recent settlement reached by the National Association of Realtors on March 15th of this year. 

As part of the $415 million settlement agreement, NAR has agreed to implement several structural changes by mid-July, pending court approval. While the final ruling in April may further impact the industry, it is crucial for agents to understand the key terms of the settlement and prepare for the new landscape. 

Here are some of the key terms of the settlement:

1. Removal of Cooperative Compensation from MLS

• Offers of compensation to buyer agents will no longer be allowed in local MLS’

• This change is designed in part as a result of concerns about agents steering their clients towards listings with higher commissions

2. Mandatory Upfront Negotiation of Buyer Agent Success Fee

• Before showing homes, buyer agents will be required to negotiate a success fee with their clients - likely either a percentage based fee or flat fee

• Open-ended compensation arrangements, such as "commission rate offered by sellers” will no longer be permitted.

3. Mandatory Implementation of Buyer Representation Agreement prior to Showing Homes

• Buyer agents must have executed Buyer Representation Agreement in place prior to showing homes, meaning agents will have increased effort required in preparing, presenting and negotiating the terms of their representation with their clients

• This step ensures transparency regarding the services provided and the agreed-upon commission or success fee.

4. Prohibition of Claiming "Free" Buyer Agent Services

• Agents will no longer be allowed to claim that their services are free to buyers, and with the upcoming changes, and it will be black and white that buyer services are not only not free, but the process also includes a step intended for buyers to have the ability to negotiate the success fee with their agent

• This change may introduce new challenges and friction points when discussing compensation with clients.

5. Inclusion of Buyer Agent Compensation Requests in Offers

• Buyers and their agents will have the option to include a request for buyer agent compensation in their offers to sellers.

• Sellers may provide concession offers upfront, and buyers and their agents can renegotiate if there is additional money available from the concession amount.

The Big Picture: Emphasizing Value, Expertise and Service

As the industry shifts from a model where buyer agent commissions are automatically included in transactions to one where they must be asked for, agents will have a higher performance threshold to communicate and establish their value proposition in the eyes of their clients, and get their commission rate/success fee agreed upon. 

While change can be daunting, it also presents opportunities for growth and innovation. By focusing on delivering exceptional service, expertise, and guidance to clients, agents can thrive in this evolving landscape that is the next chapter of real estate. Embrace the changes, adapt your strategies, and continue to prioritize your clients' best interests as your northstar.

If you have any questions or feedback regarding the upcoming changes and their implications for agents, please don't hesitate to reach out. Send an email to [email protected].