Many of you likely heard that earlier this month, the National Association of REALTORS® (NAR), proposed a nationwide settlement to a lawsuit involving real estate broker commissions. The settlement, if approved in July, looks to provide more transparency and certainty for homebuyers and sellers, and to provide more clarity and choice around real estate agent compensation on the buyer and seller side of residential real estate transactions.
Much of the reporting on the settlement has been very misleading in terms of how real estate brokerages conduct business and how the settlement will impact transaction costs for buyers and sellers. Even President Biden, in recent comments, misspoke in suggesting that the settlement makes commissions for buyer agents and seller agents negotiable for the first time. This is just not true! NAR does not set commissions and commissions were always negotiable long before this settlement. Commissions will remain negotiable between sellers and their agents. Sellers can still choose to make offers of compensation to buyers’ agents, however, once the settlement is approved, those offers of compensation to buyers’ agents will not be displayed on the MLS.
If you’ve sold a home in the past, you paid a commission to your agent’s brokerage. Of that commission, a percentage (typically one-half, but not always) would get paid to the buyers’ brokerage. Your agent and the buyers’ agent are getting a percentage of those commissions paid to the brokerages. Despite what some media reports have led you to believe, that commission was not designated by NAR or any other association or governing body. The market has always offered a range of choices when it comes to agent service, value, and fees. Sellers have always had the option to hire an agent for whatever percentage or fee they wanted. Like any other industry, real estate brokerages (and their agents) have different compensation structures based on the services they provide to their clients (whether it be home appraisal, estate strategy, property search, home listing, property valuation, or seller consultation). As a seller, if you didn’t agree with the fees or commission being presented for marketing and selling your home, you were free to find another brokerage and agent that would agree to the fees you wanted to pay. That said, you may not be able to hire the agent or brokerage you want for the commission you want to pay.
Real estate agent and brokerage fees have always, and still are today, been based on the level of service and value they provide. The settlement does not prohibit brokerages from charging a certain commission percentage for their services, and also does not prohibit a seller from making an offer of compensation to a buyers’ broker. Agents and brokerages obviously want the best outcome for their clients. Independent of the different ways your home can be marketed and shown, agents are going to achieve the best outcome by getting the most buyers through your door. So, it’s best to offer a co-op commission to the buyers’ agent as part of the transaction. It removes any reason for a potential buyer not to see your home.
How will homebuyers additionally be affected? Once approved, the settlement will require agreements between homebuyers and their brokerage and agent that will outline their services and compensation they will be responsible for if their agent’s fees are not paid through the transaction. Buyers are not restricted from negotiating payment of their agent’s fee through the transaction, but as previously stated, buyers may also be responsible for some or all of their agent’s commission.
If a buyer is represented, whether their agent is paid through the transaction or directly by the buyer, that expense is likely to be reflected in the sales price. In fact, if the buyer has to compensate their agent directly, that can have a bigger impact on the price. If the buyer is unrepresented, as a result of not wanting to potentially be responsible for the commission, that is when a deal can fall apart. If that happens, the process of selling your home starts all over again. This takes time and effort, and plants doubt in the market about your home.
Not offering a co-op commission, or something competitive, will attract more unrepresented buyers and deter many buyers. Buyers will always have the option to request that their agent only show them listings where the seller is making an offer of compensation as certain buyers might not have the funds available to compensate their agent directly instead of through the transaction.
This is why @properties Christie’s International Real Estate (“@properties Christies”) has always modeled its business as a full-service brokerage offering: highly professional, trained agents backed by an experienced management team; the most prolific, high-quality marketing in the industry; technology that makes the transaction process more efficient and transparent for clients; a large national and international referral network; and the #1 market share in the majority of the markets they operate in. I know the fees we charge are commensurate with the services we provide, and those fees are agreed upon between us and our clients. They’re not fixed in connection with NAR or any other real estate brokerage firm. We go to great lengths to offer the very best value to our clients.
When it comes to our specific business, clients have always come first to Lyn and that is the foundation of the team we are building. Our team’s experience, successful outcomes, 5-star Google reviews, negotiation skills, network and relationships, marketing programs and technology, and ability to create strategies to get deals closed are what’s important and how we earn our commission to help you buy or sell your home. That is why our commission will continue to be dictated by our value, as it always has, and will not change as a result of the NAR settlement. Buying or selling a home is one of the most important and consequential events that consumers undertake, and it is our responsibility to guide our clients through this process with the highest level of expertise and service – from the moment it becomes a consideration through the closing and beyond.
