You might have seen posts and articles about the NAR Real Estate Commission Lawsuit Settlement over the past few months.
To get more information on the details, go to https://www.nar.realtor/the-facts/nar-settlement-faqs
Here my simplified summary for buyers and sellers:
North Carolina has always required an agency agreement between the agent and a buyer in order for the agent to receive compensation. The NC Realtor Buyer Agency Agreement clearly spells out how compensation works. In short, it states that the buyer agent seeks compensation first from the listing agent. If no compensation is offered or the amount offered is less than the agreed upon compensation between the buyer and buyer agent, then the buyer would responsible for that commission or its difference. Further, the amount of compensation offered by the listing agent has long been posted on the MLS listing for that property making the process clear and easy. South Carolina has a very similar form and practice.
With the advent of the law suit settlement, the following basic points are about to go into effect this summer that will impact how we have traditionally done business:
- No details or comments of any kind regarding compensation can be placed anywhere in the MLS.
- Real estate agents cannot use any other MLS related data service to address compensation.
Buyers and Buyers agents must contact listing agents direct to learn about their compensation offer if any. A listing firm can choose to list (on the firm’s website) offers of compensation for their listings offered to buyer agents.
- It will be a requirement to enter into written agreement before touring a home- (does not need to be a formal buyers agency agreement but NAR, however NCREC requires agency agreement before offer and offer is presented.)
The market will ultimately dictate what becomes standard practice and how cumbersome it will or will not become to navigate buyer agent compensation confirmation. As is currently, if there are cases where the listing agent is not offering any compensation to a buyer agent or offering an amount that is lower that what was agreed to on the buyer agency agreement with the buyer, the buyer will be responsible for that difference. If a buyer working with an agent, requires compensation information prior to viewing a property, it will probably take more time to do that research before touring, especially when doing a multiple property tour.
As has been the practice for many years, any compensation difference to the buyer agent could be made up by:
1) the buyer paying it.
2) an offer on the property that includes seller paid closing costs that would be used to ‘reimburse’ the buyer for the compensation they need to pay their buyer agent.
3) an offer on the property that is conditioned by the seller agreeing to compensate a buyer agent as agreed upon in writing with that particular offer.
For buyers choosing not to have representation, they would deal direct with the listing agent and incur the risks of no representation- just like always.
For sellers choosing to have representation and listing their property on MLS using a broker, they will need to determine if they are offering buyer agent compensation and to what amount. Given the extent of their buyer agent compensation offering, sellers will need to consider what impact their offering will have on attracting prospective buyers to their property.
For a refresher on the current representation arrangements, please see the WWR disclosures. http://www.ncrecpubs.org/working-with-real-estate-agents
As you can see, this will make the process more time intensive from the previous practice in that the buyers agent will now need to reach out to the listing agent to confirm any offer of compensation since it will no longer be in the MLS. If the listing agent’s firm chooses to maintain a website indicating compensation, then that would need to be sought out and reviewed before the buyer-side would know what, if any, compensation is offered. It is important to note that the handling of compensation with buyer and seller clients is fundamentally unchanged for our state. Our agreements have matched the treatment of them under these practices resulting from the settlement. It also more probable that offers may change to account for compensation variances against the buyers agency agreement.
It is worth noting that the commercial real estate brokerage world has always operated in a manor similar to the post-settlement residential environment detailed above- meaning offers of compensation were property/listing agent specific and that compensation was confirmed manually (normally in writing) between the listing and buyer agents.
With this new settlement, the mechanisms of compensation have been brought to the forefront for buyers and sellers which should make it even more clear for consumers. In the short term at least, it will be more time-consuming for buyers to navigate potential properties given the newly mandated rules.
It is probable that we are entering a business environment where there will be new structures and practices for brokerage that will need to be market tested. As you might conclude, it would seem to make sense to work with professional and qualified real estate broker who can clearly demonstrate value to help navigate these uncertain times.
