On August 17, 2024, significant changes in the real estate industry took effect concerning how broker commissions may be shared or negotiated. These changes stem from a class action lawsuit settlement against the National Association of REALTORS® (NAR) and several nationwide brokers. Details of the settlement are available online through NAR, various real estate brokers, and the news media.
Some brokers and their agents may have given clients the impression that a six percent fee for selling a home or that a three percent buyer’s agent commission, based on the final sales price, was firm. This was never the case. With the class action ruling, the real estate industry is adding new disclosures to drive awareness and discussions on commissions. The disclosures provide consumers with more choices regarding how much commission to pay the broker’s agent. The disclosures also make it clearer to sellers how much, if any, compensation will be paid to the buyer’s agent.
Here’s an overview of how brokers and their agents must work with clients on compensation when marketing a home:
Agents must disclose in listing agreements, buyer representation agreements, and pre-closing disclosures that broker commissions are not set by law and are fully negotiable.
Sellers can still decide to specifically offer cooperative compensation to a buyer’s agent, but it can no longer be advertised in the Multiple Listing Service (MLS). It can, however, be marketed in other places, such as newsletters, text messages, or a broker’s or agent’s own website.
Sellers can still offer a concession to buyers in the MLS. This concession can be used to assist with closing costs or to pay the buyer’s agent, should the buyer choose. The concession offer from the seller to the buyer can be noted in the public comment section of the home’s MLS listing.
The NAR settlement also brings significant changes in the relationship between buyers and broker agents. Since there’s no assurance a home seller will pay for a buyer’s agent commission, this compensation will be negotiated upfront. A signed agreement between the parties will be required before an agent can show a buyer any property.
The buyer representation agreement includes the following four items:
Disclose the amount or rate of compensation an agent will receive.
The agent’s compensation amount must be written into the agreement as a percentage or dollar amount and cannot be open-ended. For example, the agreement cannot state, “buyer broker compensation shall be whatever amount the seller is offering to the buyer.”
The broker’s agent cannot receive compensation for brokerage services from any source for more than the amount or rate agreed to in the buyer representation agreement.
The agreement should include a statement that broker fees and commissions are not set by law and are fully negotiable.
It’s important to note that any commissions negotiated by the buyer or seller go directly to the agent’s broker. The broker’s office then distributes an agreed-upon percentage of the fee to the agent for their work in representing the buyer or seller.
Here is the 78209 real estate market activity for August from the San Antonio Board of Realtors (SABOR). There were 46 closed sales for August. The average time on the market was 50 days. There were 6.7 months of housing inventory, further solidifying a buyer-friendly market for ‘09. The average home in 78209 sold for 93.1% of the average list price.
