It's Official - THERE WILL BE CHANGES in How Real Estate Commissions are Paid 

Part 4 in our Series:  "Understanding Real Estate Commissions"

In the last post on this topic, I said it was the final part in the series.  I should have known better than to use that "final" word.  

It's been all over the news this week about the National Association of Realtors (NAR) Settlement of the Sitzer | Burnett case on how commissions are paid.  And NAR settled this past week.  If you've been reading along, you are one of few consumers who know the history, the details and how this could play out. Yay you!

So here we are - with it playing out!

Let's unpack the details so you'll know what to expect.  I've also included a FAQ - both for how this could impact home buyers and how the changes can impact home sellers.  

Now of course, this will continue to flush out as the implementation date of July approaches.  So for now, nothing officially changes.  But you'll start to see some of this play out as the real estate industry adjusts to accommodate the new requirements and guidelines.

Since the rubber is hitting the road right now, you may need a refresher.  Below are some links to what we've covered previously in this series - feel free to hop over and read those if you are just getting started or if you need a refresher.  I certainly don't expect you to memorize any of this - that's my job.  And I'm here to make this as simple as possible for you.  You know me ... always providing insight and education.

And this is a big one if you have real estate plans in the near future - because it WILL impact you.
   ✅Part 1: We explored the historical context of how commissions came to be and learned it was by public demand.
   ✅Part 2: We outlined all the details about the current lawsuits and how commissions are typically set and paid.  
   ✅Part 3: We detailed what could happen and the various (significant) impacts of those changes.

Today, we'll unpack the NAR settlement and the proposed changes that are set to activate in July.

And I'll do my best to fit this into a Nutshell 🤓

I won't go into the history or details of how commissions have been paid (that's what we've already covered). So let me dive in on what's changing.

When a home is listed on the MLS (Multiple Listing Service - and this is what "feeds" to sites like Zillow), it has historically listed a commission rate ("co-op" commission) for any agent that brings the buyer.  This is going to be removed going forward.  Now you may be saying "so what?".  Well  - this now creates a situation where the payment to an agent working with a buyer is up for negotiation.  And this negotiation COULD mean that the buyers will be paying for the agent's assistance.

Read that again.

As if it's not difficult enough for home buyers to afford the cost of the home plus the cost of the loan, down payment, closing, etc.  NOW, the buyer may be paying for their own agent.  And this applies even if the buyer calls the listing agent directly. The agent does not work for free.

BUT ... there's a potential way for this to be handled that does not require the buyer to pay the agent.  And this is where and why you need an experienced Realtor to help you navigate.  The Realtor working on your behalf as a home buyer can negotiate their fee as part of the transaction so that this does not become a burden to you as a buyer.  In order to be allowed to negotiate this on your behalf, the agent is now required to have you sign a contract called a "Buyers Agency" that allows them to negotiate on your behalf.  And this needs to be signed at the time of the SHOWING OF THE HOME.  Like most other professions, you now get to choose who you hire and what their fee and services will include. Check out the image below if you're curious about how an agent benefits you in the homebuying process.

Now let's flip over to how this impacts you as a home seller.

If you've sold a home before, you may recall that when you hire a Listing Agent, you have set the price and commission. You then decide how much of that commission goes to the Listing Agent and how much you want to offer to the Buyer's Agent.  NOW, instead of offering a commission to the Buyers Agent, you will have the opportunity to offer a "concession" to the Buyer.  This concession COULD be used by the Buyer to pay their agent, pay for closing costs, or whatever combination the Buyer decides. 

This means when you are selling a home, you no longer need to offer an 'automatic' percentage to pay the Buyers Agent.  The fee to the Buyers Agent is whatever the fee that the buyer agreed to pay the agent.  And IF you (as a seller) offer a "concession" as part of the listing agreement, the buyer MIGHT use this to pay their agent.  But it now becomes their choice.

Whew! 

Even typing this out, I can see how confusing this might be to someone who doesn't work through this on an every-day basis!  If you want to know your options as a homebuyer or a homeseller in Denver - please feel free to reach out. Even if you're not ready to take action on any of this. Seriously - no obligation. You've seen that I love educating and being a resource for you. 

Scroll down to the FAQ Section

Let's get to the FAQs on Real Estate Commission Changes

Home Buyer Commission FAQ - What You Should Know

Buyer’s agents offer invaluable guidance through the home-buying process. We're here to help you through your journey, so you can make the best decision. 

I want to see properties this weekend, but I want to understand my options. 

What should I do? Contact the agent you have been working with or begin interviewing agents. They can still show you properties. How you work with your agent and establish your relationship is evolving. Currently, any offer of compensation to your buyer's broker can be found in the Multiple Listing Service. In July, that will no longer be the case. 

What changes in July? 

Beginning in July, all agents will need to use a buyer representation agreement to show you properties. This practice is already in place in many markets and will now apply across the country. 

What is a buyer representation agreement (as defined in your state)? 

The buyer representation agreement defines the scope of work your agent is going to provide including the contract duration, services and compensation. This means you will know the services and costs upfront with the agent you’ve chosen to represent you. 

Will I have to pay my agent out of pocket? 

Not necessarily. There will be a variety of options available to you. For example, many buyers will ask the seller to credit them at close of escrow to pay their buyer broker fees while others will ask the sellers to pay their buyer broker fees directly. 

Home Seller Commission FAQ - What You Should Know

How does compensation work? 

Compensation has always been your choice. You negotiate the fee that you are willing to pay your listing agent for the services of marketing and selling your property. Sellers may choose to compensate a buyer’s agent but the buyer's agent must request an understanding of this amount before or along with the submitted offer. Beginning in July, rules for buyer’s agents will be updated to require all agents to use a buyer representation agreement to show properties. This practice is already in place in many markets and will now apply across the country. 

Do I have to put my house on the Multiple Listing Service (MLS)? 

We strongly recommend it, but it is your choice. Buyers start their home-buying process online and we want to ensure your home has the most exposure to drive interest in your home. The more visibility we have to showcase your home to buyers, the better. eXp Realty has also launched eXp Exclusives to provide registered clients access to more eXp listings and increase visibility for our sellers. 

If I don’t pay a buyer's broker, will agents show my house? 

Agents are legally required to show homes as directed by their buyers regardless of compensation. Your choice regarding buyer broker compensation is best discussed with your listing agent to determine the right decision for you.

Could I pay my listing agent more than the buyer's agent gets paid? 

Absolutely. You can negotiate the fees and services with your listing agent separately from what the buyer may request or pay their buyer’s agent. 

What if I don’t want to pay a fee to the buyer's agent? 

This is your choice. Again, your choice regarding buyer broker compensation is best discussed with your listing agent to determine the right decision for you.

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