Understanding the New Real Estate Rules Regarding Commissions

You’ve probably heard by now that changes are afoot in how real estate will be conducted throughout the country as a result of the various lawsuits that the National Association of Realtors (NAR) settled earlier this year. And like many others you may have some confusion about what’s changing and how it will affect buying or selling real estate in the future. The media has not always  gotten the story right, so my hope is to simplify it for you here so you have a better understanding of the changes. As always, reach out to me directly if you have specific questions.

Simply stated, beginning August 17 in any real estate transaction consisting of 1-4 units, the seller will no longer be offering cooperating compensation to the buyer’s agent through the MLS. Moving forward, any cooperative commission to the buyer’s agent will need to be negotiated in the buyer’s purchase offer for a property, and the amount of that commission will be negotiated up front between the buyer and the buyer’s agent.

What will change:

There are two main ways that will change the way that Realtors will conduct business moving forward:

1. For Sellers: After August 17, 2024 the commission that you negotiate with the listing agent will be for your agent’s commission only. However, you can still offer a cooperating commission to the buyer’s agent and there are still plenty of reasons to do so. There will be a space in the listing documents where you can agree to consider such concessions if they are included in any offers. It’s important to discuss the pros and cons with your listing agent up front so there are no surprises that come up during the sales process.

2. For Buyers: Prior to touring a property, buyers will be required to enter into a written agreement with their agent using a form called the Buyer Representation and Broker Commission Agreement (BRBC). This agreement form has been around for a long time and I’ve been using it for years. I think it’s advantageous for both buyer and buyer agent to consummate the relationship and memorialize each side’s obligations to the other. In my mind it’s really no different than the written contract that exists between a seller and their listing agent. Now this, or a shorter version, will be required. This form includes the amount of commission that the buyer will pay their agent at close of escrow. Any amount covered by the seller would be deducted from this amount.

When you meet with your lender, be sure to discuss this with them so you know what you are truly qualified to buy. Some or all of your agent’s commission may be able to be included in your loan.

What won’t change:

1. Commission will still be negotiable as it always has been. Moving forward there may just be changes to the number of ways in which real estate agents are paid. This may open up new standards and norms in our market.

2. Buyers and sellers of real estate will still rely on the real estate agents to help them navigate the sale or purchase of their properties. For many, buying a home is the biggest investment they make. Not using an agent for all of the intricate details, documents and negotiation will just cost you in the end.

If you or anyone you know needs real estate help, don’t hesitate to reach out.