Due to lawsuits, the way real estate compensation will be paid will be changing nationwide later this year. Traditionally, buyer's agents have been paid through "cooperative broker compensation." This meant total commission (for both the seller and buyer agents) was paid by the seller to the seller's broker then the seller's broker paid a portion (spelled out in the listing agreement) to the buyer's broker. Without going into who did what to whom, the bottom line is this will be changing. Right now the cooperative brokerage commission percentage is listed in the MLS so any agent can see what they will be paid by the seller. I have seen this number range from 1 percent to 3 percent for the buyer's broker. As of August 17, the cooperative broker commission can no longer be in the MLS. It doesn't mean a seller can't pay a commission to a buyer's agent, it just means there will need to be individual discussions and negotiations for this to be done.
The other big change that will impact those considering buying is as of August 17, 2024 all buyers will need to sign an agreement with their broker that spells out what commission they will pay the broker for their services at the closing of escrow on a purchase. The types of compensation available for buyer brokers would continue to take multiple forms, including but not limited to:
- Fixed-fee commission paid directly by the buyer
- Concession from the seller
- Portion of the listing broker’s compensation
- Compensation would continue to be negotiable and should always be negotiated between agents and the buyers they represent
The language on the contract will indicate that if the seller is willing to pay that agreed upon commission then the buyer doesn't pay it but say, for example, that the buyer/broker agreement says they will pay their broker 1 percent of the purchase price upon close of escrow. If the seller offers to pay 2 percent the buyer's agent cannot take that extra 1 percent. They can only take the contractually agreed upon 1 percent. The extra 1 percent could be negotiated as a "rebate" to the buyer for other closing costs however.
One other issue that was initially raised was the question of open houses and having buyer/broker agreements signed at the open house. The most recent guidance from the National Association of Realtors on that says two things have to be triggered for the need for a buyer/broker agreement - agents "working with buyers" and when "touring a home."
- "The “working with” language is intended to distinguish MLS Participants who provide brokerage services to a buyer—such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS Participants who simply market their services or just talk to a buyer—like at an open house or by providing an unrepresented buyer access to a house they have listed.
- If the MLS Participant is working only as an agent or subagent of the seller, then the participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer." So no buyer/broker agreement will be needed at an open house.
An important take away is this will be the new normal. It means buyer agents will need to have difficult discussions with their clients. Since all buyer agents will have to have these signed forms eventually this will become routine. No one is expected to work for free but how we approach commission payment is changing and we will have to learn to live with it.