If not already, our industry will be doing a complete 180 as it relates to our way of doing business. The traditional, tried-and-true process of the listing broker offering compensation to the buyer brokers through the MLS will come to a screeching halt on or about August 17, 2024. Many brokers have already started the process by offering $0 compensation to the buyer’s agent in the MLS. By August 17, the listing agent/broker will be prohibited from offering compensation through the MLS.

In a nutshell, our industry operated with impunity or so we thought. For many reasons, over the past 5 decades, we have operated showing the buyers and sellers that we were price-fixing, based on what we said out loud, in our advertising and what we ignored from other agents. The result, even though we can pound the table and say no, we were showing that we were price-fixing. If you disagree, look at a random 100 MLS listings, and focus on the co-broke. Without saying it out loud or here in writing, you will find at least 80 -90% of them offering the same compensation.

Who made the decision to create that same compensation? Or did it naturally reach and settle at that amount over the decades.

There is no one person or entity that created the problem. We know the problem, so must work to remedy it soon. The new rules from NAR as part of the settlement agreement with the courts lays out the changing rules, as discussed here.

The concept of every REALTOR paying or looking for a specific amount of money will all change. Yes, the seller may still pay some compensation to the buyer’s agent, but it will not be a direct offer in the MLS; it will be a response to buyer’s agent request for compensation. That request should be based on two factors:

1. How much the buyer offers their agent on the Buyer-Broker form, or other forms where the buyer agrees to pay some or all of the agent’s compensation. The buyer agent must decide, apart from any previous rate of compensation, what they would expect as a total compensation from one or both parties.
    
2. Any wording in the listing to buyer broker’s, such as the “seller will consider a request from the buyer agent…”, without stating a specific dollar amount or percentage. Listing agents will be required to talk to their sellers as to the language and the amount they might offer upon a request.

If a listing agent gets push-back from the seller, then the agent should alert the seller that without any compensation to buyer agent, the listing might have limited showings.

Aside from other changes, one change in practices will create challenges for many agents.

First, the REALTOR Code of Ethics has always required of us that we determine and establish our compensation before commencing any effort to accept the offer of cooperation. Once a listing agent offered us the co-broke compensation, we make that determination right away, as the offer of compensation from the listing agent was a unilateral offer, which required no response or acknowledgement.

Next, we must recognize that the offer of compensation in the MLS will go away, thus there will be no establishment of compensation through the offer of cooperation. Meaning, unless a buyer’s agent has established their FULL compensation from the buyer via the Buyer-Broker Agreement, they are prohibited from showing a listing unless they have established that from all sources.

Example, the agent would like $18,000 compensation from a specific sale (dollar amounts used rather than a specific commission rate). They negotiated a buyer broker agreement with their buyer, for $12,000. As such, when the agent identifies a property that they would show their buyer, the agent must stop right there, and reach out to the listing agent, in any fashion, to determine if the seller will offer any compensation. There will be new AAR forms to make that request.

Here are the “what-ifs”:

1. The listing agent says yes, the seller will offer $4000. If the buyer is fully prepared to pay the $12000, that would mean $16,000 to the agent. They wanted $18,000. This will be business decision to either negotiate more with the listing agent and the seller for more than the $4,000. It would be difficult at that point to ask the buyer for more, since your contract with them says $12,000.
    
2. The listing agent says yes, and the seller will offer $10,000. The buyer agent has a decision. Accept the $10,000 from the seller, and reduce what the buyer owes them, to reach the $18,000 total. DO NOT ACCEPT BOTH IN FULL THAT WOULD EXCEED THE $18,000. Since the agent has a fiduciary obligation to their buyer, they should make the effort to obtain as much as possible from the seller.
    
3. The listing agent says no and refuses to negotiate. That would mean either accept the full compensation of $12,000 from the buyer, and show the property, or negotiate with the buyer. However, if the buyer agreed to pay you $12,000, that is a contractual agreement, so it would be hard to revise that contract.  In this case, you could and even should tell the listing agent that they will not show the house since the seller is not offering any compensation. That is a slippery slope, since you do not want to “threaten” the seller. Allow your broker to help you here.

Once this all plays out, and both agents feel more comfortable in negotiating with their client, there will be a reckoning as to the level of compensation. Yes, this could cause a lower level of compensation to both agents, that we will all need to work through.

Remember; if you show a listing to your buyer, before establishing any compensation from the seller, you have essentially waived any compensation from the seller or listing agent, meaning your only compensation will be what the buyer broker states. If you failed to obtain a buyer broker agreement, or any agreement from the buyer to compensate you, you will work for free!

The harsh reality is this; agents will need to work harder and be more diligent when negotiating with the clients, all the while probably seeing a reduced amount of income in most transactions.