2 months ago
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The landmark date of Aug. 17, 2024, has come and gone, and the real estate industry is still plugging along, despite the business practice changes mandated by the National Association of Realtors’ (NAR) commission lawsuit settlement agreement now being implemented nationwide.
In the Greater Boston area, Linda O’Koniewski, the broker-owner of Leading Edge Real Estate, described the first few days of the business practice changes as “uneventful.” But even though O’Koniewski and her agents have spent months preparing for these changes, she said the date did not come without a sense of trepidation.
“I won’t tell you that there wasn’t anxiety,” O’Koniewski said. “When we got to the close of day on Friday, we were all kind of waiting to see if it was going to be a big event and then it wasn’t. Not that individual agents might be struggling or running into things, but I haven’t seen or heard any horror stories or anything awful yet.”
According to real estate professionals, the biggest adjustments they had to make this week was to get buyers to sign buyer representation agreements and to explain to sellers that while they don’t have to offer buyer broker compensation, they will most likely see most prospective buyers ask for some help in paying their agent.
“The biggest difference is that sellers need to have the new format and commission structure explained to them fully and carefully,” said Rachael Dotson, an agent at Rhode Island-based Residential Properties Ltd. “Many are interested in the potential savings created by the new commission structure. Still, none of them want to jeopardize their sale by deterring buyers who might have to forgo representation or cannot afford to pay commission out of pocket to their agent.
“Most sellers see the value of making sure their deal closes and are open to discussions of some participation in the buyer’s agent fee.”
On the buy side, agents say they are glad buyer representation agreements are now mandatory.
“I do like that we have to have a buyers representation agreement to show all houses now. We can get in a lot of trouble for showing a house without one,“ said Mandy Nichols, an agent at Dallas-Fort Worth-based Brixstone Real Estate. “In the past, some people would use agents to show them houses, and then go let someone else do the paperwork and purchase the house for them, which was horrible.
“I know quite a few agents it hurt. It’s nice to know that when you show a property that they have to use you to buy the home, unless you had them sign you were just showing the property and not representing them.”
But for some agents, getting buyers to sign these agreements hasn’t exactly been smooth sailing.
“Presenting these agreements is becoming the line of delineation between great agents and not-great agents. It is really leveling the playing field,” said Jason Posnick, the sales manager at Lamacchia Realty.
Over the weekend, Posnick said one of his firm’s agents met with a buyer who had previously met with an agent at another firm and was not pleased that the agent asked them to sign a buyer representation agreement. The Lamacchia Realty agent ultimately was able to secure a meeting with the buyer after presenting two different agreements — a showing agreement and a more formal buyer representation agreement — which allowed the consumer to see they had options and explained why they were being asked to sign an agreement.
In addition to dealing with consumers, agents are also having to deal with other agents, some of which may not be as well prepared as others.
“One of my agents actually called me on Friday and talked about how we’ve done such a good job preparing that they have gotten to the point where they feel like the changes are no big deal, but that might be a little bit of a disadvantage in the short term because it seems like the rest of our market kind of has no idea what they are doing,” said Brad Twiss, the broker-owner of Portland, Oregon-based Neighbors Realty.
Another wrinkle is that not all agents, brokerages or sellers are handling offers of buyer broker compensation the same way. While some firms — including eXp Realty, Lamacchia Realty and NextHome — are not engaging in cooperative compensation on their listings, other agents like Lindsay Pettinelli still plan to offer it if their seller agrees to it.
“The fact that we are not allowed to disclose buyers’ agent compensation in the MLS doesn’t seem beneficial to the buyer,” said Pettinelli, an agent at Providence, Rhode Island-based firm Churchill & Banks. “There are many buyers who don’t have the funds to pay their agent’s commission out of pocket along with their down payment and closing costs; they are relying on the list price including compensation for their agent.
“If buyer agent compensation is not offered as part of the list price for a house, I think it is valuable for a buyer to know that upfront. Why would we not disclose that info in MLS? How is that protecting buyers?”
Pettinelli is using contracts with her sellers that outline the total commission she will charge and how much she is going to pay another agent for bringing a qualified buyer to the transaction. She also noted that she will be advertising offers of cooperative compensation on her social media channels and alongside listings on her brokerage’s website.
Although O’Koniewski acknowledges that some agents may take a similar route to Pettinelli, she has told her agents to view seller concessions as “totally irrelevant.”
“It doesn’t matter,” O’Koniewski said. “If buyer’s agents have a buyer agreement for a certain amount, that is what they need to get. They can’t make more if the seller is being generous, so I don’t know why they are even asking what the seller is offering. I think that is the missing piece of the puzzle for a lot of agents right now.”
Complicating things for O’Koniewski and her agents is that MLS PIN, one of the multiple listing services her firm uses, is still displaying offers of buyer broker compensation on the MLS, as it did not opt into NAR’s settlement.
“It is causing a lot of consternation, and I’ll admit that our agents are a little bummed out that we aren’t doing it, but I feel like by putting compensation in the MLS, that is like Kryptonite for agents and brokerages right now. It is putting a target on your back, but there are some big brokerages here, I think, that are choosing to live dangerously,” O’Koniewski said.
Twiss attributes agent and brokerage apprehension about the removal of buyer broker compensation offers from the MLS to a fear that once it is removed from the MLS, sellers will no longer be willing to help with buyer broker compensation.
“I don’t think that is the case,” Twiss said. “Our agents have been having discussions with sellers to expect buyers asking for help with their agent fees, and I don’t think it has been a big deal.”
Across the country in Rhode Island, Dotson also said sellers thus far seem to be willing to entertain offers that ask for help with buyer agency fees.
“The changes are still very new, and most sellers seem willing to participate on some level as they understand the importance of buyers having guidance and representation to get to the closing table,” Dotson said.
While agents may differ on how exactly they are dealing with the business practice changes, they all agree on the fact that it is still too early to tell how exactly their businesses and markets will be impacted.
“Just like with TRID, it will take a while to see how it will affect the marketplace, and for a few months, it will just be chaos,” said Brian Huskey, the associate broker of Montana-based ERA American Real Estate.
“We are just answering so many questions from consumers who saw things on the news this weekend, and agents who have done a ton of training but are still figuring how to deal with these changes in real time. It is just the Wild West again.”
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