By Mike Bodeen · 27 May 2024
On August 17th of this year, the American residential real estate world changes – and it changes most profoundly for Buyers and Buyer’s agents.
The recently settled lawsuit of Sitzer-Burnett (aka Sitzer) vs NAR (National Association of Realtors) and various real estate companies is mandating that local Multiple Listing Services (MLS) no longer be allowed to publish any fee to a buyer’s agent that will be paid by the seller. And a buyer must enter into a written agreement with their buyer’s agent BEFORE that agent shows them any homes.
In the past, a buyer’s agent was paid at the successful close of escrow by the seller’s agent who would split their fee they received from the seller. The seller and seller’s agent had, previous to that, entered into a listing agreement where the seller would agree to pay a fee, usually of 5% to 6% to their agent. Now the buyer and their buyer’s agent must utilize a signed document (employment agreement) very much like the seller and seller’s agent.
In this document, like a seller’s listing agreement, the parties would agree on the term of the agreement, the amount of compensation, how the compensation would be paid, etc. Before Sitzer, if a buyer wanted to view a home listed for sale, they would need to work with a licensed agent to do so. It could be an independent buyer’s agent, or it could be the Seller’s agent. For this discussion, we’re not addressing a “For Sale By Owner – FSBO” where an agent does not need to be used. No written agreement was typically used for the buyer, except a Buyer Agency form which usually came into play when an offer was written. This disclosure stated who the agent parties represented, be it buyer, seller, or both. It was not an employment contract.
We (agents) are not paid for our experience, time, money, or effort spent for our client – either buying or selling. We have ALWAYS been paid for results. No results – no money! End of story!
When the sale closed, the agents companies got paid from the seller’s proceeds. We’ll say 6%, which was then split 50/50, between listing agents company and buyer’s agent’s company. The actual agent who interfaced with the buyer or seller, was then paid by their respective company according to their individual employment agreement with their Broker. On a $450,000 sale (Phoenix Metro’s current median price), the 6% fee would be $27,000, so each company would receive $13,500.
In the past it made no difference whether someone like myself with 40+ years of professional experience represented the buyer, or a newbie fresh off getting his license for the first time. We were both paid the same, but clearly there is an actual difference in our qualifications.
Further, it made no difference if I worked for 6 months showing my clients 50-100 homes before they opted for “the one,” or the newbie that was holding an open house and the buyer who bought it happened to walk into the open house he was sitting at and instructed the agent to write a full price cash offer – we were paid exactly the same amount. Doesn’t seem right, huh?
Now here’s the thing that most people don’t understand. We (agents) are not paid for our experience, time, money, or effort spent for our client – either buying or selling. We have ALWAYS been paid for results. No results – no money. End of story!
The reason why some think that agents are paid too much fail to appreciate the nature of risk. The greater the risk, the greater the reward. Not many (sane) people are willing to spend their own resources of time, money and energy, without a guarantee of getting a financial return. They are (perhaps wisely) risk averse. I can’t recall how many times I would have loved to have a regular paycheck.
But this will all change August 17th. Now a buyer’s agent must convince a buyer ahead of time to hire them, and what they’re worth – in actual dollars. And how much is that? Ahh, that’s the great unknown question, but we’ll explore that question next week.
Until then, we say thank you to our veterans and their families! For you especially, have a wonderful Memorial Day!