04/12/2024
If you have seen the headlines lately, you may be aware the National Association of Realtors recently settled a giant lawsuit and that changes are afoot in this industry. Some of the stories have garnered a lot of attention. Everywhere I have gone lately, people have asked me what is going on and my thoughts about it, so I thought I would try to summarize here in this update.
It has been the norm for sellers to offer a buyer’s agent commission on the sale of their home through cooperative commission splits via the listing agent. While this has never been a requirement, many sellers believed that this was the case. Starting in July, Realtors will make it very clear that offering buyer’s agent compensation is not a seller requirement. I believe that it is in the seller’s best interest to support cooperative compensation to cover the buyer’s agent commission, as this can ensure their home is exposed to the greatest number of qualified buyers in the shortest amount of time, but I’m not so sure that all sellers will feel the same.
In addition to the above, Realtors will soon need to have a buyer representation agreement in place before showing them any homes. This means that before I show anyone a home, they have to agree to cover my buyer’s agent fee or some other compensation (such as a commission), if cooperative compensation is not being offered by the seller. I anticipate that this may encourage buyers to work without a buyer’s agent.
No one is really sure how this is going to pan out. I am definitely going to have some interesting conversations with both buyers and sellers and we will see what happens.
I strongly feel that it is in everyone’s best interest to have proper representation on both sides of a transaction, but with the new rules, there are likely to be buyers that go unrepresented by an agent into transactions. This may have negative repercussions not only for buyers, but also for sellers.
I think a good analogy to this is the car industry. Right now, when you go to a new car or used car dealership, you know the cards are stacked against you. The dealer knows a lot more about the value of cars they are selling than 95% of the buyers. As a buyer, it sure would be nice if you had someone on your side that could help you find other similar cars on the market that meet your needs, negotiate a better price for you, and understand the questions to ask about the car’s maintenance and past owner history. This “expert” would likely be able to save you money, decrease your stress level & anxiety during the buying process, and make sure everything is done according to the current laws. As it stands now, most people don’t have a car buying broker and that is why buying a car continues to be a poor experience for the average buyer.
Now take this same scenario and instead of a $35,000 car, you are talking about a $650,000 home. It is a scary prospect for most buyers to go into a transaction without someone on their side. Unfortunately, I believe the end result of this will have the greatest effect on the first time home buyers, as they are generally the ones without extra cash and will be the most skeptical about signing an agreement with a buyer’s agent before they see homes.
As a Realtor, I take great pride in the value that I bring to my clients. I am obsessed with real estate. I generally work 7 days a week (though I am getting better about taking Sundays off) and spend hours a day watching the market, talking with other agents, dealing with contracts and running comps for clients to make sure they know the exact value of the home they are interested in. I am confident that what I bring to the table will continue to hold weight in this changing industry. My strong feeling is that Realtors that do good work and offer value will continue to thrive in this industry and the ones that are just hoping for a quick buck will likely find other jobs.
I've worked full time jobs since the moment I graduated college in 1998. I have a strong work ethic and have never been afraid to put in the extra time and effort to make sure my job was done well. Yet, in every job that I had before becoming a Realtor, the energy and hours spent never correlated to the compensation I earned. When I became a broker and my own boss, I finally came into a job where this extra dedication paid off. I plan to adapt to the new normal and see how things play out. Being a Realtor is one of the few jobs that exist out there where you can still be your own boss and need just a small amount of capital to get going. I surely hope that these new rules won't change those fundamentals of the industry. I just don't think I could function with a boss ever again :-).
There are definitely still a lot of unknowns, so my opinion on the matter may change. I would love to hear your thoughts on the lawsuit and the proposed changes. Would you as a seller still want to offer compensation to buyer’s agents? Would you as a buyer feel comfortable signing something at your first meeting with an agent? Would you be ok with the seller’s agent also representing you on a transaction? There certainly is a lot to unpack here and I look forward to some fruitful discourse in the coming months.
And one may wonder, are Realtors now required to do a lean back arms folded portrait? I believe that, yes, that will also now be required.
