Residential brokers and brokerages across the country have been eyeing Aug. 17, readying for the National Association of Realtors’ new commission rules to take effect.
The changes, which were part of a $418 million deal to settle multiple antitrust lawsuits, include removing offers of compensation to a buyer’s broker from multiple listing services and requiring agents to have written agreements with buyers before touring a home.
When NAR’s settlement offer was announced in March, there was uncertainty around how some things would shake out, but Chicago brokers have always been clear on one thing: As buyers have more transparency into how much agent services cost, they will likely expect them to prove their value.
“I honestly don’t think the changes are that broad,” said Thad Wong, co-founder of @properties Christie’s International Real Estate. “In reality, it’s just bringing greater opportunity for the buyer to understand how the agent is being paid, and what they’re being paid.”
Brokerages like @properties, and NAR itself, in recent weeks have rushed to provide educational courses, mentoring and other internal resources to equip agents with skills to navigate these conversations.
From thinning head counts and commission earnings, the broad forecasts for the fallout have been aplenty. But brokers are still contending with how their day-to-day work stands to change.
It could be more phone calls to listing agents, investing heavily in getting to know a specific market area, having more upfront conversations and tracking how the broader industry is adapting to the changes to better educate buyers.
In a city of neighborhoods, the aphorism holds up: “location, location, location,” said Compass agent Paige Dooley, who ranked number six on The Real Deal’s list of Chicago’s top brokers of 2023.
Hyperlocal expertise helps buyer agents understand the value of a home based on things like its relative location, property size, finishes, and proximity to public transportation, schools, downtown or the lake. A broker with specific area knowledge can be an authority on when a home has been overpriced or priced very competitively, so they can negotiate more effectively on behalf of their client, Dooley said.
“The elements that create value around a property vary daily,” she said. “If you aren’t a local expert, you might not be able to provide that same kind of value.
Providing value to buyers could also mean knowing how the mortgage lending industry is evolving to answer questions around how buyer agent commission can be accounted for during closing, said Re/MAX president Amy Lessinger.
The U.S. Department of Veterans Affairs released temporary guidance in June allowing veterans to pay their buyer agent’s commission if it is not accounted for by the seller. Previous guidance barred them from doing so if they planned to use a VA loan, which requires low to no down payment.
With the NAR policy changes going into effect, the department now allows veterans to pay agent commissions so that they “aren’t disadvantaged in the marketplace,” Veterans United Home Loans reported.
The mortgage lending industry is also exploring new credit options for buyers who may not have enough cash on hand to make their down payment as well as their buyer agent’s commission if the seller isn’t offering to cover commission and is unwilling to negotiate, Dooley said.
Brokers anticipate these situations will be rare, but Dooley said Compass agents have been meeting with mortgage lending experts to understand what the options may be for lower income or first-time buyers that are bringing less cash to the table.
When signing the required written buyer agreements, agents will need to talk to buyers about their budgetary constraints, what they are comfortable paying in commission and whether they want to tour a home if the seller is not offering to cover buyer agent commission.
Historically, buyer agents could expect commission rates of about 2.5 percent to 3 percent offered by the seller. The changes are expected to stoke increased competition and negotiation earlier in the process. From offering services a la carte to inking exclusive representation agreements, brokers could expect to up their communication with involved parties earlier in the process.
Most broker teams are dedicating staff members to this, according to Dooley. Brokers can still put commission offerings on property listings posted to their own professional websites but most brokerages, like Re/MAX, will not be listing commission offerings on their sites, which largely run on MLS data feeds.
“Moving forward, it will be more transparent about who’s representing you and what you may or may not be paying for that,” Dooley said. “So, that’s one of the best things.”
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