By Mike Bodeen · 12 August 2024
Why This Will be a Bad Deal for Buyers and Their Agents
I’ve written somewhere north of 500 Mike’s Monday Market Snapshots over the years. Every issue is created on the day of publication until just recently when I started to write them on Fridays for a Monday release. We’ve never duplicated an issue. These are custom and relevant to the time we find ourselves in.
And we are now in such a time. And never have I been I more stumped about my topic – until today.
The class action lawsuit of Sitzer-Burnett VS NAR and a host of major Real Estate companies, which was won by Sitzer-Burnett, forced a settlement by NAR that brings major changes to real estate compensation, particularly about how Buyer’s agents get paid.
These changes:
No longer can a seller offer buyer agent compensation through the Multiple Listing Service (MLS).
Buyer’s agents will be compensated either by their client directly, or through seller concessions outside of the MLS.
A buyer must have a “written” agreement with a buyer’s agent before seeing homes which sets the amount of compensation, terms and conditions.
These rules go into effect August 17th – this coming Saturday.
Where the Rubber Meets the Road:
The major change in all this upheaval, is this: Compensation to a buyer’s agent now happens between a buyer and their agent, and it must be spelled out in writing. The buyer is responsible to pay their agent, assuming they want agent representation. They are not required to.
The seller does not automatically pay the buyer’s broker fee. It must be negotiated. Practically speaking it means that if a buyer wants to have their agent compensated from the seller, the buyer’s agent will need to contact the seller’s agent to see if remuneration is a possibility.
A seller does not have to pay a “co-broke” fee to a buyer’s agent. (In reality, they never had to before, but the many decades of use established this as a customary practice)
The listing agreement does give the seller the option of having his agent authorize an offer of compensation to a buyer’s broker through the listing agent, but it cannot be offered through the MLS. Time will tell if it remains customary or not.
Why is this a bad deal for buyer’s?
Lack of buyer representation. Many buyers don’t have the additional resources to pay their agent, if the agent’s fee cannot be recouped from the seller. First time home buyers, and buyers looking to get into a home with a low down payment (e.g., VA, FHA, low down conventionals, etc) may find themselves having no professional representation.
Buyers could go directly to a seller’s agent to write the offer, but that agent will not represent the buyer, only the seller. And a heads up, that means that WHATEVER a buyer tells that seller’s agent, that seller’s agent is required to inform their seller. There is no confidentiality with a non-represented buyer and a seller’s agent.
Imagine this scenario: A non-represented Buyer says to the seller’s agent Sam, “Sam, this house (you just showed us) checks all the boxes for us. We love it! Mary has to have it!! We’ll offer “X” Dollars, but, if need be, we’ll pay full price.”
The buyer, in effect, just made that remark to the seller, because the seller’s agent is “required” to inform his seller about that conversation.
With Buyer’s representation, on the other hand, the buyer’s agent is forbidden to divulge that conversation to the seller’s agent – it is and is to be confidential.
Can you see how this puts the buyer into a disadvantaged and compromised representation?
Finally, this is a moment of truth for thousands of agents, especially newbies in the business. It was never easy for someone to make a decent go of it in the industry. Now it will be harder than ever, hence an exodus of agents has begun and will most likely increase in the months and years ahead.
Even for those of us with many decades of professional experience we will need to come to grips with this new era that is upon us.
For The Bodeen Team, this is an opportunity to rise to the challenge and demonstrate our value to those who will entrust perhaps their largest financial transaction of their life to us. They will not be disappointed.
Mike Bodeen