Keeping it Real
My real estate journey kicked off in 1996 as a leasing consultant on the beautiful campus of Indiana University in Bloomington, Indiana. Something about helping people find their home for the next chapter of their lives just drew me in. From that day to today, I have seen some monumental shifts in the industry. I remember when we first started using the internet to find houses, the rise of Zillow (which was supposed to eliminate buyer’s agents), the financial crisis of 2008 that was triggered by high-risk mortgage lending practices leading to millions of foreclosures and caused home values to plummet, and slowing new construction, contributing to the housing shortage we still see today. And let’s not forget the whirlwind of the COVID-19 pandemic – it was so crazy down here that my family almost forgot what I looked like!
Every one of the aforementioned crises was touted by some as the end of the world for real estate agents. Obviously, that didn’t happen, but with each monumental shift that has come our way, we have had to adapt. The latest to disrupt our industry is the 2024 National Association of Realtors lawsuit settlement concerning how buyer’s agents are paid. Although I don’t think this is going to be the end of our world, it’s definitely going to shake things up a bit.
As a buyer, the first thing you’re going to notice is that your realtor (regardless of how long you have been working together), is now required to have you sign a document before showing you even a single property. Why, you ask? What happened?
In years past, real estate commissions were typically structured so that the seller paid both their own agent’s fee and the buyer’s agent’s fee at closing. This system, particularly the sharing of commission information on the Multiple Listing Service (MLS), led to allegations that it inflated home prices because sellers paid the buyer’s agent without the buyer having much say in the fee negotiation.
Two major lawsuits, Sitzer/Burnett and Moehrl, claimed that these practices violated antitrust laws by limiting competition and inflating commission fees. They argued that this system didn’t allow for enough negotiation, causing consumers to pay more for real estate services. In the settlement, sellers are no longer permitted to post offers of compensation to the buyer’s agent through the MLS; commissions will now need to be negotiated openly between buyers, sellers, and their respective agents. And, before your agent can show you a single property, you will be required to sign a Buyer Agency Agreement. This agreement details how and, how much your agent will be compensated, outlines the agent’s duties, and services, and specifies whether the arrangement is exclusive – where you commit to working with only one agent for a set period – or non-exclusive, allowing you to work with multiple agents. In the latter case, you’re still bound by the terms regarding payment if one of the agents finds you a property. The agreement should clearly outline its duration, the terms for cancellation, and the geographic area it covers. This area can be as specific or broad as agreed upon, ranging from a single property to an entire neighborhood, a street, one or more counties, or even the entire state of Florida. It’s worth noting that the agreements aren’t entirely new. North Carolina has required them since 1995.
So how does a buyer’s agent get paid? It will likely vary from region to region, and from one seller to the next, but since the changes went into effect on August 17, I have seen a range of responses. On most of the properties I have shown, the listing agents have reached out to me through text or email to confirm their sellers were still covering the buyer’s professional fees. In this situation, the seller’s agent will provide a document signed by the seller confirming the buyer’s agent’s compensation; we simply include language in the offer specifying that the seller will be responsible for those fees. Prior to the recent changes, comparable home sales in MLS (comps) typically reflected the seller covering both the listing and buyer’s professional fees in the sale price. Under the new rules, if a seller chooses not to pay the buyer’s fee today, the home’s value should be adjusted downward by 2.5-3 % compared to homes sold before the change on August 17, when both agent’s fees were included. Moving forward, I hope we can find a way to share this information with other brokers to ensure home values are accurately assessed.
Eventually, just like all the changes through the years, the latest one will just be the way we do business; I think there might even be some positives to come out of this, but that’s an article for another day!
Please reach out to me personally if you have any questions about this or anything real estate. You can always reach me at Natalie.Gutwein@premiersir.com.
Stay Sunny, Siesta!
