The buyer’s job is to look at houses, listen to their advisors (us, your attorney, and your lender), and then make the best choice of house for your money. Your job doesn’t include a deep dive into the ins and outs of the various lawsuits flying around the real estate industry. Still, you need to know what’s going on, so I am here to tell you!

The deadline for implementation of the changes to real estate business practices is August 17, 2024. The National Association of Realtors (NAR) is a big organization. They are driving the real estate business, and we at 4 Buyers Real Estate are prepared to respond to the decisions they’ve made.

Some quick history:

Exclusive buyer’s brokerage for residential buyers began in the early 1990’s. The National Association of Exclusive Buyer’s Agents (NAEBA) was established in 1995. Foremost for NAEBA was that every buyer is treated as a client. A client relationship includes a contract. A contract includes the services that will be done and the compensation owed to the brokerage.

It has always been an unjust set up that sellers and their agents negotiate the commission that pays both the buyer’s and the seller’s agent at closing, without any input from the buyers. We’ve never liked that, but it was the business model and we couldn’t change it. Despite the results of the lawsuit, we still contend that the buyers are paying all of these commissions, since the fees are being paid from the money within the sale price.

The lawsuit centers around whether the rate of buyer’s agent commission was discussed with the sellers when they listed their homes. This is (literally) not our business.

Before the current legal challenge, that offer of compensation to the buyer’s agent was published on MLS. At 4 Buyers Real Estate, what we were eventually paid is and has been governed by our contract with our clients, regardless of what was offered in the MLS.

Prior to 2006, there were companies who — by policy — offered a lower commission to buyer’s agents on MLS. How did exclusive buyer’s agents get paid fairly under those conditions? It was our everyday practice, at that time, to add a clause into our client’s Offer to Purchase; it included our commission within the sale price being offered. In all but a few transactions, sellers agreed to pay us the commission that our clients requested.

We stopped adding this clause when mainstream companies began practicing designated buyer’s agency. In 2006, NAR diluted the term “buyer’s agent” by lobbying for designated agency — where a buyer’s agent can work for a firm that gives fiduciary advice both to the buyer and the seller of the same home. The industry norms changed in 2006, because of these buyer’s agents. When nearly all companies were representing buyers and sellers, the compensation for buyer’s agents on MLS was nearly always at or near the commission that we require, by contract, with our clients. We no longer needed that additional clause.

Back to the 2024 lawsuit:

As of May 2024, we expect to see changes in place by the middle of August. Most of the changes boil down to these two things:

  1. There will be no publication on MLS of buyer broker’s commissions that the seller expects to include in the sale price. No publication of it in a number of ways. These are covered in numbers 1-8 below. (I think that the lawyers repeated themselves so that real estate agents don’t slip around the intention of the rule. )

This is a change in the way that the seller’s agent communicates what the seller expects to see as buyer agent compensation on the Offer to Purchase. Right now, that compensation rate is published in MLS. The Court believes that publishing these rates creates a normal fee that constitutes price fixing. Therefore, the intention of this new policy is to break the cycle of normal fees and allow sellers to negotiate what they will pay agents.

Buyer agents fees affect the overall price a buyer will be paying. Therefore, there will be ways to find this material condition of the sale. This information will either be published elsewhere (like individual agent sites), or seller’s agents will find another way for buyer’s agents to get this information. Until the methods of communication settle into a norm, there may be a bit of chaos for us.

We will add a clause to the Offer to Purchase contract, so that our clients can finance these fees within the purchase transaction. That is how these commissions have been paid all along; this will just change the paperwork. MAR (the Massachusetts Association of Realtors) has already created a template for this. It is likely to just become part of the Offer to Purchase.

2. Buyers and their agents will be required to enter into a written agreement prior to touring a property.

4 Buyers Real Estate has always worked with our clients with a contract. Our contracts have always had our compensation requirements included.

The change that we have (already) set up is that we have created a temporary contract. That way, prospective buyers are not bound to us before they have a chance to experience our service.

Before the lawsuit, we used to offer a “test drive” of the house hunting experience. An agent would show one or more properties to a prospective buyer. No contract. No strings. We can’t do that anymore. So, we’ve created a one-week contract. That allows us to show a prospective buyer what we have to offer and still be in the requirements of the lawsuit settlement. They can sign an ongoing contract after that or find another company, whatever they choose.

Addendum: the full MLS policy changes, with notes:

In reaction to the lawsuits against NAR, MLS, and big real estate companies, these are the policy changes that go onto effect August 17, 2024. The vast majority of them have to do with communication around commissions.

Pursuant to the requirements of the proposed Settlement Agreement, the MLS policies and model MLS governing documents were reviewed and updated with the key changes below: 

  1.  Eliminate and prohibit any requirement of offers of compensation in the MLS between listing brokers or sellers to buyer brokers or other buyer representatives.  This is a change from rules that said MLS listings must offer compensation to any agent the brings a buyer to close on that property.
  2. Retain, and define, “cooperation” for MLS Participation. Cooperation is about how listing companies allow agents to show the property and submit offers in a fair manner.
  3. Eliminate and prohibit MLS Participants, Subscribers, and sellers from making any offers of compensation in the MLS to buyer brokers or other buyer representatives. There will no longer be published offers of buyer broker compensation anywhere on any listing.
  4. Require the MLS to eliminate all broker compensation fields and compensation information in the MLS. There will no longer be published offers of buyer broker compensation neatly put in a specific field on any listing.
  5. Require the MLS to not create, facilitate, or support any non-MLS mechanism (including by providing listing information to an internet aggregator’s website for such purpose) for Participants, Subscribers, or sellers to make offers of compensation to buyer brokers or other buyer representatives. There will no longer be published offers of buyer broker compensation in databases that republish MLS property listings.
  6. Prohibit the use of MLS data or data feeds to directly or indirectly establish or maintain a platform of offers of compensation from multiple brokers or other buyer representatives.  Such use must result with the MLS terminating the Participant’s access to any MLS data and data feeds. There will no longer be published offer of buyer broker compensation in any way, using the MLS. Violators will be kicked out of the MLS.
  7. Reinforce that MLS Participants and Subscribers must not, and MLSs must not enable the ability to filter out or restrict MLS listings that are communicated to customers or clients based on the existence or level of compensation offered to the cooperating broker or the name of a brokerage or agent. Agents will not filter MLS data to restrict the properties shown to clients or customers based on buyer broker compensation level.
  8. Require compensation disclosures to sellers, and prospective sellers and buyers. Agents must discuss compensation with their clients and put that in writing.
  9. Require MLS Participants working with a buyer to enter into a written agreement with the buyer prior to touring a property. Buyer agents must have contracts with their clients.