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Buyer agent commissions in flux. How does this impact you?

Dani Fleming

Dani Fleming, the principal of MA Properties, has been involved in real estate for many years...

Dani Fleming, the principal of MA Properties, has been involved in real estate for many years...

Apr 2 16 minutes read

Most likely you've heard some news about changes in the real estate industry regarding seller/buyer agent fee structures. There has been a lot of speculation as to all facets with regard to what is happening. At MA Properties, we have been keeping our sellers up to date with updates as they happen, and making adjustments to existing listing contracts real time. Our philosophy is total transparency. Here is what has been happening.

Court cases

Many events have occurred in the real estate industry across the country in recent months. The first being a lawsuit out of Kansas City, Sitzer/Burnett, which was suing a number of real estate brokerages, but primarily NAR (National Association of Realtors) of colluding to increase seller costs when selling a home. There was also another lawsuit, Nosalek, which was local and related to MLSPin (the MLS that is used in MA and in some other New England states) which had reached a settlement.

In November 2023, when the Kansas City case found that NAR/brokerages were guilty of collusion, the DOJ (Department of Justice) then halted the settlement of the local MLSPin cases while they reviewed the Kansas City decision.

I should point out now that MA Properties are NOT members of, or affiliated with, NAR and never have been. We are licensed as a brokerage in the state of MA but have not voluntarily joined NAR as many other brokerages have.

The week commencing Feb 19, the DOJ have proposed changes they would like to see made in the settlement of the local case against MLSPin after their review of the Kansas City case. Under the DOJ's proposal, the ability to offer compensation to a buyers agent via MLS would be made illegal.

According to HousingWire in an article published on 2/22/2024, 'Under the DOJ's proposal, the practice of cooperative compensation - in which the listing agent makes an offer of compensation to the buyers agent in the MLS - would be illegal. 

Although the DOJ's statement of interest only pertains to MLSPin's settlement in the Nosalek commission suit, industry participants anticipate the judge's ruling on the DOJ's proposal to have a massive impact on agents nationwide, as it would change agent compensation rules across the country. Additionally, the judge overseeing the Sitzer/Burnett trial could use the statement to guide his final ruling, which is expected in May 2024.'

Since then, on March 15, 2024 NAR settled their multitude of commission lawsuits, and agreed, among other things that NAR owned MLS's and NAR affiliated MLS's (of which the local Massachusetts MLSPin is) will not have the ability to specify buyer agent cooperating compensation. It is anticipated that this will be in effect from August 17 2024. This will mean that the seller will not be able to directly compensate the buyers agent for writing a successful offer on their home. The buyers agent may write a request for compensation in the offer and it's then the sellers choice as to whether to accept the offer as written or negotiate. 

The National Association of Realtors (NAR) have released their revised policies for the affected MLS's on May 3rd 2024. The revised policy reflects the practice changes required by the settlement as follows:

  • Eliminate and prohibit any requirement of offers of compensation in the MLS between listing brokers or sellers to buyer brokers or other buyer representatives.
  • Retain and define “cooperation” for MLS participation.
  • Eliminate and prohibit MLS participants, subscribers and sellers from making any offers of compensation in the MLS to buyer brokers or other buyer representatives.
  • Require the MLS to eliminate all broker compensation fields and compensation information in the MLS.
  • Require the MLS to not create, facilitate or support any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purpose) for participants, subscribers or sellers to make offers of compensation to buyer brokers or other buyer representatives. 
  • Prohibit the use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives. Such use must result with the MLS terminating the participant’s access to any MLS data and data feeds.
  • Reinforce that MLS participants and subscribers must not, and MLSs must not, enable the ability to filter out or restrict MLS listings that are communicated to customers or clients based on the existence or level of compensation offered to the cooperating broker or the name of a brokerage or agent.
  • Require compensation disclosures to sellers, as well as prospective sellers and buyers.  
  • Require MLS participants working with a buyer to enter into a written agreement with the buyer prior to touring a property.

As you can see, there is a lot of change in the industry because of these recently settled lawsuits, but it does seem likely that as of Aug 17 the local MLSPin will need to enact all of the policies outlined above. How this changes the industry practices is still an unknown, but you can be sure it is changing. 

I'm a seller. How does this impact me?

As a seller you have many choices. Since the beginning of March 2024, prior to the NAR's settlement we have been alerting our sellers who had existing listing contracts, and any new sellers, of what was happening and giving them the option to adjust the amount payable to the buyers agent, if anything at all, based on current events.

In March 2024 we had:

  • 3 sellers choose to lower the 2.5% fee to 2% (all of these homes sold over asking price)
  • 1 seller choose to lower the 2.5% fee to 1% (we had 6 offers on this home, priced at $1,988,000, and it has sold for well over asking price)

All of the homes sold for over asking price after 5 days on the market, with no appreciable difference in buyer activity with the change in buyer agent compensation.

  Currently scheduled to come on the market in April 2024 we have:

  • 2 sellers who have chosen to remain at 2.5%
  • 1 seller who has chosen to lower the fee to 1%
  • 1 seller who has chosen to offer a fee of 0%

When we get listing contracts signed, we have always asked the seller what buyer compensation they want to pay, if any, and it is totally their call. One seller coming on the market in May couldn't decide so we signed a flat fee listing contract, and we will fill them in on what we are seeing in the market a few days before they come on the market. We can then amend the contract, or keep it as it is, so they come on the market at 0% to the buyers agent (currently) or change it to offer something to the buyers agent. It is early days in the process, we want the sellers to have all of the real-time information at their fingertips to make a decision based on what is happening right now.

So, what are other agents doing with regard to this? I've picked Lexington, MA to pull the current buyer agent compensation offered by these homes. For the years 2018 - 2023, 92% of the homes sold offered 2.5%, and 6% offered 2% to provide historical context as to the distribution of buyer agent compensation in the town.

Surprisingly, we are seeing very few agents in Lexington being proactive with regard to this.

In March 2024, there were 32 homes that came on the market.

  • 25 offered 2.5% to the buyers agent
  • 5 offered 2% to the buyers agent (1 of which was our seller)
  • 1 offered 1% to the buyers agent (our seller).

In April 2024, there were 44 homes that came on the market.

  • 35 offered 2.5% to the buyers agent
  • 3 offered 2.25% to the buyers agent
  • 3 offered 2% to the buyers agent
  • 1 offered 1% to the buyers agent (our seller)
  • 1 offered 'Negotiable' to the buyers agent (our seller who was going to offer 0% but then opted to make it 'negotiable')
  • 1 offered 0% to the buyers agent (but the listing agent was also the buyers agent and obviously had a buyer already lined up for the home as it went UAG the day it came on the market)

I will be updating this blog post monthly to provide additional data on the experiences we are having with our sellers choice of buyers agent compensation, and what other sellers/agents are doing with regard to the buyer agent compensation in the town.

I'm a buyer. How does this impact me?

With the decades long method of the seller being able to offer the buyer agent compensation for successfully negotiating an offer for their home discontinuing in July 2024 in most areas around the country, there are several methods that buyers can use to continue on their home purchase path. 

There are various methods a buyer can use to buy a home if the seller is not offering a buyers agent compensation. With all of the court cases, and settlements, this is coming, if not right now, but within months.

1) You can see the home and write an offer with the listing agent. 

  • This is where 'Buyer beware' comes into play - the listing agent represents the seller, not the buyer. Legally the buyer cannot get any advice from the listing agent as the agents fiduciary responsibility is to the seller. 
  • You will be competing with offers written by buyers agents representing their buyers who do this on a daily basis and have strategies for writing successful offers.

2) With the assistance of a buyers agent.

It has been a requirement by some brokerages to have signed buyer contracts with buyers when they begin looking for a home to buy to ensure the agents are paid for their efforts. In the past, the buyers agent fee has been typically paid by the sellers as part of the buyer agent compensation offered. 

From July 2024, when MLS's remove the ability for a seller to offer compensation to a buyers agent there are some methods that the agent can use to be paid, but all of them will require a signed buyer contract between the buyers agent and buyer. 

  • The agent can write into the offer that the seller is to pay 'closing cost credits' (the buyer agent fee) to the buyer at closing. This is to allow the closing cost credit amount to be financed by the buyers mortgage, and is used to pay the buyers agent. Until the mortgage companies, and regulators catch up to the 'new way of doing things' this is a method that allows the buyer agent fee to be financed. If the seller negotiates this amount, or refuses to pay the amount, then the buyer needs to have the funds available to be able to pay their buyers agent for their services. 
  • The buyers can negotiate the fee to pay their buyers agent with the buyers agent, and not have this included in their offer on a home and it is payable by the buyer at closing.

Moving forward be prepared to have a conversation with your buyers agent about how they are going to get paid for their services since this is still evolving at this point. One thing is now clear from the NAR settlement is that all buyers will need to sign a buyer contract to work with a buyers agent. On a positive note, your offer may be competing with other buyers offers who are using Option 1, and NOT working with a buyers agent. 

An experienced buyers agents can make all the difference with their negotiation techniques, proven strategies in writing successful offers, and their experience of the real estate market, and a myriad of value components that other buyers will not have. By using an experienced buyers agent you will be in your dream home sooner than a buyer who does not have skilled representation while avoiding the potential risks associated with not having a seasoned agent on your side.

The real estate market is undergoing a dynamic shift in 'how things are done' and it is a rapidly changing environment so its important to keep informed. 

To review our 'Professional Fees - Listing' brochure please see below.

MA Properties Professional Fees 

Professional Fees

Have a question about all of these changes?

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If you'd like more information about selling today or in the future then our Advanced Selling Strategies masterclasses might just be what you need to understand the current real estate market and top tips on how to maximize your sales price. Take a look through the videos below to find the masterclass that best suits your situation. They're all of different lengths as there is just so much to share!

1. Smart Decisions

You deserve to be the smartest person at the closing table.

And we know how to get you there. By taking a data-driven approach to real estate. We carefully review the performance of the local market. Observe the underlying trends. And analyze all available data to provide you with an informed listing price — maximizing your sales potential. 

Watch this masterclass to learn more about the strategies we use to make you the smartest person at the closing table!

2. Preparation

Preparation leads to success.

To get the highest price for your home, you need to consider how it looks and feels to a buyer. During our preparation meeting, we’ll offer suggestions to make your home ‘move-in ready’. Concerned about how you will pay for any preparation? We have that covered also, MA Properties will cover the cost of the work and we get reimbursed at closing. 

Watch this masterclass to learn more about the preparation process and to see more before and after examples.

3. Staging

If you wow them, you’ll win them.

Preparation may be key. But staging is what creates that wow factor. In our pre-stage meeting, our professional stagers will offer suggestions to style your home with buyers in mind. Our staging services can range from adding simple accent pieces to fully staging a vacant home. And we provide these services and furnishings at no extra cost to you. 

Concerned about who will pay for staging? Staging is always an integral part of our services and always complementary. 

Watch this masterclass to learn more about the staging process and to see more before and after examples.

4. Marketing

Stand out to get noticed.

Today’s buyers have many choices. We only have a few minutes to capture their attention before they move on to the next home. So a smart marketing plan is critical.

We use sophisticated online marketing and social media tools to target, track and convert buyers. We develop targeted email blasts and re-targeting ads. And we create an entire library of professional photography, videos, and interactive 3D tours of your home. It’s all housed on a stunning, custom website — letting buyers tour your home, plan renovations, and even imagine their furnishings in your space.

Watch this masterclass to learn more about the preparation process and to see more before and after examples.

5. Teamwork

The MA Properties team makes it happen.

Real estate is our team’s passion. And we put that passion into practice for you. Every single day. Our agents and inside sales team will work nonstop to find you a buyer. Our agents are all full-time agents with a proven track record in sales, negotiations and marketing.

And our operations team will ensure that the sale is seamless and stress free. They are full-time teams handling listing, closing, staging, and marketing. And they’re all working for you.

Watch this masterclass to learn more about how our entire team can help you on the path to a successful transaction.

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