As we wrap up the last monthof doing “business as usual” I thought it would be helpful to dive a little deeper into what we can expect within our real estate community moving forward.
Most are aware of the recent proposed settlement involving the National Association of Realtors which includes a couple of changes in our standards of practice. For those of us in the business for some time, the change is welcome. For many who struggle with articulating their value, lack confidence in the service they provide or struggle with conversations related to compensation – the wolf is at the door.
Effective mid-August, there will no longer be a published offer of compensation in the Multiple Listing Service (MLS), the main portal in which listing brokers advertise their sellers’ properties. This doesn’t mean there isn’t compensation being offered, it just means you have to verify it with the listing Broker.
As it stands currently, when a listing is taken, the listing office and Seller determine the total fee for the services and also what portion of that fee is being offered to the cooperating office, i.e. the office who will be representing the buyer in the transaction. The total listing fee is and always has been negotiable and is agreed upon between the seller and their listing representative at the time the listing is taken. Typically, the fee is shared equally with the Buyers’ representative but that is not always the case. We have seen an uneven split from time to time and depending on who your listing Broker is, the larger split may be retained by the listing agent or as we do more often than not, it can be offered to the Buyers’ Broker. When a buyers’ broker shows a home, they are inherently agreeing and accepting the offer of compensation posted in the MLS. If the fee is insufficient, in their opinion, they will need to either negotiate with their Buyer to pay the deficit or they may incorporate it into the terms of the offer, provided the Buyer is aware and in agreement.
Effective mid-August, Brokers will no longer be including the offer of compensation in the MLS itself but rather rely on direct communication with the cooperating broker, publishing it on their personal website and/or at the property.
The second change requires all Brokers to enter into a formal contract with any Buyer prior to showing them properties. As it has always been with Sellers and listing contracts, Buyers will now be made aware of the services being provided by their Broker, the expectations of both parties regarding the scope of the assignment and also how the Buyers’ Broker will be compensated and what their fee will be for providing said services. Each Broker will be able to establish their base fee and prospective Buyers should prepare themselves, it will vary wildly.
I won’t be surprised if seasoned Brokers, those with years and years of experience, industry connections, offices with a larger market share of listings, etc .will be inclined to ask for more than say a newer broker, a one man show or someone who is just dabbling in the business and not really investing in all the opportunities to really provide top notch service such as attending their office meetings regularly, attending the two weekly MLS meetings, remaining active in the market fluctuations, regulation changes, etc. It comes down to value, right? Connectivity within the industry is going to elevate the value of Brokers undoubtedly, and I think it goes without saying, Buyers are going to gravitate to those who are in the know simply because it improves their chances of not only finding what they want but also finding it first. The quality of relationships Brokers have with other Brokers will also be a determining factor in the success of negotiation, collaboration, and success. Relationships are going to be more important than ever so for anyone within the industry who has not been operating with the utmost integrity; Bless Your Heart.
Many forums have been held, lots of discussion has taken place. Our office has been gearing up for these changes for quite some time and without question, I am proud to say we are ready to roll. Having a value proposition prepared that clearly outlines your skillset, your experience, and the service you provide as a Buyers’ Broker is more important now than ever. As Buyers start shopping for their Broker, ask the tough questions that really set your Broker apart. As we have said, a trained monkey can unlock a door. Make sure you are aligning yourself with a reputable broker with a proven track record of not only success but collaboration. Learn about their successes in multiple offer situations, ability to successfully navigate gnarly home inspection findings, learn if they are solution oriented and have grit. These attributes will be worth its weight in gold.
Within the Buyer Representation Agreement, the Buyer will be able to dictate that they only want to see homes where a Seller is offering to cover the Buyer Broker compensation. With rising loan fees, including closing costs and down payments, I would venture to say most Buyers just simply will not have the ability to pay the additional fee, though they will undoubtedly rely on representation by a professional Real Estate Broker in order to achieve their desired outcome.
If there is no offer of compensation by the Seller but Buyers still want to pursue a home, having the Buyer Representation Agreement in place enables the Buyer to include in their offer that the Seller is required to pay the Buyer Broker fee. It will be a condition of their offer, just like the inspection and loan, so even if a Sellers and Listing Broker opt not to offer compensation, do not be surprised if the request is made regardless. The Seller of course can say no but taking into consideration the market value of their home was more than likely determined using comparable sales that included both professional service fees for the Brokers on both sides, one can and likely will, argue that if you aren’t also including the fee for professional services to the Buyer’s Broker, you will need to reduce your listing price accordingly to offset the fact that the Buyers will be paying that fee directly.
Please do not be seduced (or allured or swayed) by someone who isn’t “making” you sign a Buyer Representation Agreement. There simply isn’t a go-around. Unlawful practices in our industry won’t be tolerated and quite frankly, do you want to be associated with or represented by someone who has decided the rules don’t apply to them? Situation ethics has no place in our industry.
This is definitely a lot to unpack and certainly shouldn’t be left to Google searches or social media to explain. If you are thinking of buying or selling and really want to dive deeper to understand these changes and how they may impact you, do not hesitate to reach out to your trusted real estate professional. We welcome the conversation and are talking about it daily, having countless roundtable discussions and even role playing with other Brokers to be sure everyone is up to speed and can articulate appropriately how this change will impact our industry moving forward.
Change is inevitable and without question can be scary. How about we embrace this new industry standard as a positive practice that will continue to benefit Realtors and consumers alike. Full transparency is essential, and this encourages just that.
