Have you heard the news? Big changes are here in real estate, and every residential buyer and seller needs to know the details!
As of Saturday, August 17, 2024, working with a Realtor® to buy and sell residential real estate has had its first major change to agent compensation in over 100 years. With most transactions being managed with Realtors®, these new terms will directly affect the way homes are bought and sold across the nation. United Real Estate Partners has adopted these new changes a few days early effective August 15, 2024. This has been a hot topic with plenty of varying opinions, so we want to share the basic facts with you.
The Background Information
Historically when a homeowner listed their house for sale with a Realtor®, a commission would be negotiated to be paid by the seller to their agent's brokerage as compensation for managing the marketing and sale of the property. This commission would be paid only once the house had been successfully sold. An important condition of the commission was that the Seller Agent would split the total commission with a Buyer Agent's brokerage to compensate them for bringing a ready buyer and handling the buyer's side of the transaction.
If you've sold real estate with an agent before, you'll recall negotiating commission with your agent upon listing the property. For buyers, commissions typically weren't necessary to discuss as their agent would be compensated for the sale by the Seller's Agent.
This has been the general business model for agent compensation for decades, but a recent lawsuit (Burnette v. National Association of Realtors®) alleged that this method has resulted in sellers being forced to pay for buyer's agent services. This sentiment isn't entirely accurate because Seller Agents were sharing their own agreed-upon commission with the Buyer's Agent, rather than the seller having to pay the Buyer's agent directly. However, a settlement was eventually reached and has resulted in new rules to encourage more compensation transparency.
All Realtors® must comply with the new compensation standards, as the rules are legally binding and non-negotiable. Realtors® who choose to ignore these new requirements risk hefty fines and even their license.
What You Need to Know
For Sellers
Under the new rules, any compensation paid by a seller to their agent to market and manage a sale must go to the agent only. If a seller wants to offer compensation to a Buyer Agent, this must be explicitly stated in the Listing Agreement and treated as a separate fee or can be negotiated later on a Purchase Agreement with a buyer.
In addition, the new rules prohibit Seller Agents from offering ANY sort of commission or bonus to a Buyer's Agent in the Multiple Listing Service, a database of all listed properties throughout our region.
For Buyers
Buyers will now be required to sign a Buyer Representation Agreement prior
to touring any properties with a Realtor®, and will now be responsible for their
Buyer Agent's compensation. This agreement will outline the services provided by
the Buyer Agent and clearly state the compensation that the buyer will be responsible for paying.
What to Look for in a Buyer Representation Agreement
Details of the relationship between the buyer and Buyer Agent;
Agreement time frame (start date and expiration date);
Roles and responsibilities of both the buyer and the Buyer Agent;
Clearly explanation of the compensation or commission that has been negotiated between the buyer and Buyer Agent to be paid by the buyer;
Cancellation and termination details.
Moving Forward
These changes reflect a new era in real estate sales, with a focus on transparency and clarity in Realtor® compensation. These new requirements I've highlighted above are just a few aspects of the NAR settlement, with new information and implementation practices still coming up.
For over 100 years, Realtors® have guided clients to successful sales throughout the country. We at United Real Estate Partners recognize the importance of having professional representation through such an important purchase, and will continue to work with our clients to achieve our high standards. The process may be a little different, but our priorities remain the same - assisting our community in enjoying the opportunities of homeownership.
When choosing your agent representation, be sure to discuss their overall knowledge of these new regulations to ensure you're protected. As a brokerage of over 140 members of the National Association of Realtors® (NAR) throughout Southern Louisiana, our entire team is fully committed to adhering to these new rules while continuing to provide the highest level of service to our clients.
If you have any questions about how the NAR settlement might impact your buying or selling process, we're here to help! Please don't hesitate to call our offices at 504-305-4930 or 985-256-5500 to speak with a Realtor® about your options today!
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