Illinois real estate players are moving quickly to help agents adapt to impending changes to broker commission rules.
The National Association of Realtors and, now, @properties and Christie’s International Real Estate moved to settle lawsuits filed over commission rules.
As part of NAR’s proposed $418 million settlement that scored preliminary approval last week, the association agreed to policy changes including eliminating the field for buyers’ commissions in the Multiple Listing Service. Among the new ways buyer agents can ensure they get paid are flat fees for buyer services, and signing exclusive agreements before touring homes with buyers.
The new rules, which take effect in July, open up buyer’s brokers to more scrutiny earlier on when working with clients, local leaders said.
“Every time you go to sell a house, even if it’s a previous client, you’re always kind of getting interviewed,” said Compass agent Jeff Lowe, whose brokerage team ranked first on The Real Deal’s list of Chicago’s top residential brokers last year.
Lowe said that while he’s been interviewed by buyers before, it’s not the norm. “More often than not, they were referred directly to me or they were buying in a neighborhood where we have a big presence so they would just come to us,” he said.
Now, the process is more up in the air.
Illinois Realtors association, which offers pre-license and continuing education courses for agents, is updating its curriculum and mentorship program in advance of the changes that will go into effect in July.
Compass and @properties Christie’s International Real Estate have held internal training in response to the changes, according to Lowe and Leigh Marcus, a broker with @properties. Compass is in the process of putting together a “buyer’s agent book” to help them prepare for these conversations alongside other seminars and podcasts it has released, Lowe said.
The changes could set stronger buyer agents apart from those who only work on a few deals a year, pushing out agents who may be less equipped to navigate tricky conversations around contractual agreements and broker commissions, top Chicago brokers say.
Adapting to the new normal
“This has started a professionalization of the industry,” said Marcus of @properties Christie’s International Real Estate, who came in at third on Chicago’s list of top brokers last year. Marcus’ own professionalism was called into question last year when he was recorded talking about laying off a female employee “before she gets pregnant again” in leaked audio of a company call.
“If you’re newer in the industry, and you don’t have a track record and you don’t have a lot of success, then yes, I think it will be harder, but as it should be, right?” Marcus said.
Illinois Realtors president Matt Silver, on the other hand, rejects the idea that newer or lower-transacting buyer agents will get pushed out.
“I want as many people to be in real estate and to stay in real estate as possible,” Silver said. “Who am I to say if you’re not doing 10 deals a month you’re not a real agent?”
Silver said the association is working to support its members in preparing for the changes.
“It’s going to define how we operate,” Silver said of the NAR settlement. “It’s only a win for the profession.”
In addition to mandatory contractual agreements between buyers and agents, NAR agreed to scrap its long-held policy requiring listing agents to offer a portion of their commission paid by the seller — a rate that typically hovered around 5 or 6 percent — to the buyer’s agent. Listing agents can still split commissions with buyer’s agents if sellers agree to it, but the particulars of this split can no longer be advertised on Chicago’s Midwest Real Estate Data and other NAR-owned multiple listing services.
Buyer’s agents will now need to negotiate this with the seller and their agent or the buyer, perhaps as a closing cost.
Proving your worth as a buyer’s agent
@properties has been talking to its agents about the NAR settlement so they can field questions from both buyers and sellers, which Marcus said have slowly begun to pop up in his interactions with clients.
“The most common question we get from the consumer is: ‘I saw the news, how does this affect me?’” Marcus said. “If agents can’t answer that question, that’s the first thing that will tip off a buyer or seller that the agent might not have that much experience.”
Brokers’ experience levels and client connections are at the heart of some predictions on how the new status quo could cut down the industry.
A 2023 study from the Consumer Federation of America on annual home sales by a random sampling of NAR agents working for major brokerages in four urban areas found that about half of agents sold one or zero homes in the preceding year and 70 percent sold five or fewer. The median number of annual sales was just over two homes.
This means a relatively small portion of NAR-affiliated realtors are “transacting enough business on a regular basis to be considered successful, competent, all of those things,” Laura Ellis of Baird & Warner said in an interview after NAR’s settlement. “And the public felt that they didn’t receive any value.”
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