It's an exciting time to be a Realtor, folks! Change is in the air and our industry is shifting- in ways we hope will be for the better. Let's dig into the details.
Many of you may have heard about the National Association of Realtors anti-trust settlement that was adjudicated this year. There have been many headlines about it, much speculation, and many misconceptions swirling about what it all means for the industry.
We want our clients and friends to be informed about the real estate market, so please read on below about what you should know as a consumer and what this all means for K&A.
What changes are coming down the pike?
The settlement all boils down to wanting to foster more competition among agents. The gist of the ruling was that the commission structure, as it has been for the past 30 years, created an environment where agents were less likely to compete with each other on price and service offerings. So, the settlement imposed some new rules upon Realtors in an effort to spur more competition and varying price models in the marketplace.
Change #1: Offers of Compensation for Buyers Agents
Historically, the home seller has paid buyer's agents as part of most real estate transactions. This has been a benefit for buyers, as most folks do need representation and help when purchasing a home. Most buyers, as they typically use most of their available cash for their down payment and closing costs, have not had the additional funds to pay their agent. This compensation has been listed up front on the Multiple Listing Service and was pre-negotiated by the listing agent when they were getting the seller's home listed.
This offer of compensation will now not show on the Multiple Listing Service. Commissions to buyer's agents can still be offered but not on the MLS. The goal here is that whether a seller agrees to pay a buyer's realtor commission should be part of the offer for the home and a part of regular negotiations rather than pre-determined.
Sellers can still pay buyer's agents commission just like in the past, and many will probably continue to do so as it often brings benefits like giving them a chance to walk away with more money than they otherwise would- it's just that that fee can no longer be offered upfront on the MLS. We expect many buyers will likely request that sellers pay their agent's commission as has been most typical; however, the option for sellers to forgo this if they want to should be more evident.
Change #2: Signed Agency Agreements Up Front
Realtors are now expected to have buyer agency agreements signed with all parties before touring homes. The goal here is for home buyers to clearly understand how much and in what way their agent will be compensated earlier in the process than has been commonplace. Given that all these conversations will need to happen at the beginning of working with an agent, consumers should be able to compare Realtors, their offerings, and their fees more easily. The spirit of the settlement is that Realtors should be able to present their value proposition and fee structures up front to buyers so buyers can make better-informed choices about who they'd like to work with.
We've read about some misconceptions, such as buyers can no longer have an agent, buyer's agents can't get paid, and more. These are misinterpretations of the ruling's intent. It's simply that who will be providing compensation to a buyers' agent will now likely be negotiated as part of an offer—not upfront like before—and buyers and their agents will have pre-agreed-upon compensation agreements before seeing homes together.
So, what do these changes mean for how we operate at K&A?
These changes are minor and will not fundamentally impact how we work with our clients. If you'd like to know what we do as buyer's agents, you can read Our Commitment to Home Buyers here.
It will be an interesting few months as we watch how the industry and market react. Will homes become more or less affordable? Will we see more varied agent business models? Will new unforeseen opportunities exist for buyers, sellers, and agents alike? Only time will tell.
If you have questions about the settlement or anything related to real estate, we'd love to answer them and hear your thoughts.
As always, please don't hesitate to reach out. Until next time-
Allison and Ken
