With the recent media attention, it is clear that major changes are happening in real estate this month. There has been a wide range of commentary, from predictions of the industry’s demise to suggestions that real estate services will now be essentially pro bono. As someone with over four decades of experience in helping buyers and sellers and running two of the largest brokerage companies in the world, I find it frustrating to read these misinformed opinions.
Let’s quickly review the two primary changes required in the National Association of REALTORS settlement. The outcome was a result of underestimating the class action attorneys’ ability to sway a jury towards a massive award, leading to over $40 million in attorneys’ fees paid out with less than $15 provided per person in the participant pool, most of whom had no complaints to begin with.
First, the compensation a seller offers to a broker assisting a buyer in purchasing a home will no longer be displayed in the Multiple Listing Service. This means that buyer agents must now contact listing agents individually to inquire about compensation amounts or find alternative methods. Additionally, the previously guaranteed compensation is now only a representation, requiring a separate agreement between brokerages before most offers from a buyer are submitted.
Second, all REALTORS are now required to have a buyer-broker representation agreement in place requesting compensation for real estate services before buyers can be shown a home. This compensation may be fully or partially offset by the seller. These agreements may include flexible terms regarding the properties covered and the related time frame. Some real estate brokers may view this favorably, especially those who have experienced working with a buyer for months without compensation.
The new rules were justified as consumer-friendly, with class action attorneys portrayed as champions of real estate buyers and sellers. However, in my experience, buyers have never preferred paying the commission directly rather than having it included in the purchase price. Commissions paid by the seller to the buyer broker were always optional before the settlement.
The goal of the suit was to completely separate selling and buyer commissions, yet the previous structure never restricted either party from paying compensation to the broker of the other party, and this will remain the same. If a seller no longer wishes to offer compensation to a buyer’s broker, that outcome may still occur with a request from the broker or the buyer in a contract offer.
Real estate transactions are emotional, and the efficiency and customer satisfaction in how real estate is transacted in this country have been admired worldwide. The foundation of real estate sales evolved out of practicality and success, not collusion or decree.
What used to be a simple process now requires a complex decision tree flowchart. These changes lead to reduced choices for real estate customers and infringe upon the rights of property owners to sell or buy homes as they see fit. It feels like a Brexit moment where an idea seemed good but is now proving to be problematic.
Real estate is not a public utility but a business where owners set charges in a free market. Fortunately, brokerages will still set their own fees, offering a wide range of services from discount to premium with fees to match.
We have prepared extensively for these changes, ensuring that buyers and sellers remain well-represented and achieve their real estate objectives. We are ready to continue serving our customers’ needs and best interests, just as before.
Budge Huskey is the Chief Executive Officer at Premier Sotheby’s International Realty.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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