South Florida broker David Kurz got a call recently from a prospective buyer who asked to see an Aventura home that same day.
To do that, Kurz told the client they would need to sign some commission-related paperwork first. The client then moved the showing to the next day — and then ghosted him. Kurz, of LPT Realty, believes the client was likely looking for another agent to show the home, without having to agree to pay a commission.
“We hope and dream every agent is massively ethical, and they ask for the same document,” Kurz said, referring to the now-required buyer’s broker agreements. “Some agents will [represent buyers] for free.”
Such agreements are part of the National Association of Realtors’ settlement in a class action lawsuit over real estate sales commissions. The shifts, which include the Multiple Listing Services eliminating the entry field that states how much, if any, commission the seller is offering the buyer’s agent, went into effect nationwide on Aug. 17.
South Florida agents say that the changes have created more work for buyers’ agents, and confusion all around, but sellers are still offering buyers’ brokers commissions.
Agents face fines if they violate the new rules, and risk not getting paid.
“When you are showing these properties to these buyers and there is no buyer’s broker agreement, you’re possibly wasting your time,” said real estate attorney Claudia Cobreiro.
Getting buyers on board
The primary challenge is introducing the concept of the buyer’s broker and touring agreements to clients, who aren’t accustomed to signing contracts so early in the homebuying process. Agents are having to navigate these conversations with buyers.
“[Buyers] understand the gist of it,” said John Cregan, a Sotheby’s International Realty agent in Palm Beach. “There’s just been so much publicity, everyone has some sense of what you’re talking about.”
Part of the discomfort in having these conversations is raising the issue of compensation so early on in a broker-client relationship, something that would normally feel gauche, said Brown Harris Stevens agent Whitney McGurk. But the ubiquitous nature of the buyer’s broker agreement also helps smooth over some of the friction.
Brokerages are providing their own versions of these forms to their agents. The templates may specify that the agent represents a client for a specific period of time, or is tied to just one property.
“Whether a buyer uses me or someone else, you’re going to have to sign the same form,” McGurk said. “That makes the conversation a little bit easier.”
Agents say that some buyers are on board — until they actually read the agreement.
“Some have no problem signing these, and then some other buyers have been a little bit more hesitant or have pushed back on these agreements because they don’t understand them fully,” said Douglas Elliman’s Devin Kay.
Convincing buyers to sign the forms will ultimately protect buyers’ agents, said Corcoran Group’s Mick Duchon. But “it’s so new that it’s seen as an obstacle,” he said.
Growing pains
Adapting to the changes will take time. In the immediate term, brokers are leaning on their training and staying organized. There’s a lot more paper to be pushed now.
“It’s really [about] prepping our back office staff, our admins that are handling a lot of the paperwork,” said Margit Brandt, an agent with Premier Estate Properties in Palm Beach.
Some say navigating the transition is proving smoother for top agents and those with more regular deal flow, compared to those just starting out. It can also create hiccups for brokers trying to do business on short notice.
“It makes things a little bit more difficult when you’re trying to show off-market property that is on the fly,” McGurk said. “I just have stacks of these agreements in my car ready to fill out at a moment’s notice.”
Cobreiro said the lawsuit that sparked the settlement “was intended to protect consumers, but ultimately it is hurting consumers” so far. Even after the changes went into effect, she’s been hosting about three trainings a week at brokerages’ offices.
“The consumers are not getting a uniform message from the realtors,” said Cobreiro, of Coral Gables-based Cobreiro Law. “Sometimes the listing agent is requiring forms that in my opinion the buyer’s broker doesn’t need. Ultimately you’re seeing a lot of people with different interpretations.”
Cobreiro said she’s also fielding requests from agents who want custom forms created. She advises against that.
“In a time where consumer confusion is higher than we’d like,” she said, “it only adds to that confusion when you show up with a seven-page agreement.”
Commission stasis
The first question listing agents are now fielding from buyer’s agents is whether the seller is offering a commission, and if so, how much. If a seller isn’t offering to pay the buyer’s broker, that could deter buyers from touring the home.
For the most part, though, agents haven’t yet seen a shift in how much they are paid. Kurz said “you’re going to have some knuckleheads that aren’t going to offer it.” But that’s not anything new, he added.
Palm Beach agents Brandt and Dana Koch haven’t seen any sellers refuse to pay the buyer’s broker so far.
“You want as many people through the doors as you can possibly have,” said Koch, a top agent with the Corcoran Group. “You don’t want to deter anyone.”
Agents say commissions have always been built into the price.
“There’s only one pot of net money,” Cregan of Sotheby’s said. “That’s going to be the total net exchange of funds between buyer and seller. It kind of doesn’t matter who pays the commission.”
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If the buyer has to pay their agent, then the offer price would be adjusted.
“Sellers might think they’re going to make more money,” said Elliman’s Kay, “but it’s not going to work like that.”