Thu, Apr 25th 2024 05:20 pm
By Vienna Laurendi
THE QUESTION: “Vienna, I heard Realtors are no longer charging commission, is that true?”
WHOA! SAY WHAT?!
THE SHORT ANSWER: The recent media buzz is because multiple brokers and the National Association of REALTORS were found guilty of colluding to inflate or maintain high commission rates and were ordered to pay damages of more than $2 billion. The NAR and several brokers have chosen to settle.
Many of you may have received a post card in the mail announcing that you could be eligible to be part of the class action suits and owed a portion of the damages.
IN GREATER DETAIL: In 2017, a Midwest couple became upset when they found out that a portion of the proceeds from the sale of their home were allocated to compensate the real estate agent that represented the buyer of their home. They understood they were responsible for paying their Realtor, the one that represented them, the one that they hired, the one that they signed a listing contract with.
But the buyer’s agent? The buyer’s agent didn’t work for them, the buyer’s agent worked against them!
Yet they had to compensate them?
In 2019, they chose to sue. In the last five years, multiple copycat lawsuits have sprung up all potentially resulting in the disruption and restructuring of the real estate business as we once knew it.
If the courts approve the NAR settlement proposal this year, how buyer brokers get compensated is going to look much different. The listing broker, hired by the seller, will be responsible for making sure that the seller is aware that they will be compensating the listing broker at the time of closing, and that it is optional to also compensate the buyer’s agent. Along the same lines, the buyer’s broker, hired by the buyer, will be responsible for making sure the buyer is aware they will be expected to compensate the buyer broker at the time of closing if the seller has chosen in advance not to compensate them.
SO NOW WHAT? Home sellers may feel some excitement at the idea of only paying half of what they historically paid, now that it is being clearly defined that it’s optional to compensate the buyer’s broker. Buyers at first blush (and their agents, quite frankly) may feel some angst since, traditionally, they haven’t had to really think about compensation, it’s always just been rolled into the transaction.
Buyers may feel they’ll have to go forward unrepresented because they aren’t capable of compensating their agent outside of the transaction. So now going forward, Realtors will be empowering both home buyers and sellers by clearly explaining in the very beginning of their relationships how exactly compensation is earned and collected by both brokers.
THE SILVER LINING: The good news is, Realtors are not out of a job. Even better news is that property buyers and sellers can continue to rely on a real estate agent’s representation and protection for all their future transactions. We will find ourselves comfortable in our new business practices as both consumers and professionals before we know it.
There are still lots of questions, especially for the buyers in the marketplace, specifically whether or not they can include their agent’s compensation in the transaction. And the answer is yes, they can, so long as the property seller is agreeable through negotiations. The main difference now is that agents must talk about it from the very beginning, making sure both clients – the buyer and the seller – have a full understanding of how their individually contracted agent is getting paid.
Vienna Laurendi is a New York State Associate Real Estate Broker affiliated with Howard Hanna WNY Inc.’s Laurendi Home Selling Team on Grand Island, and Executive Director for the Buffalo Niagara Association of REALTORS. You can email your real estate questions to her at [email protected] or call/text her at 716-4-Vienna (716-484-3662). This article is an opinion piece and was not written with the support of A.I.