The National Association of Realtors (NAR) entered into a provisional settlement on March 15, 2024, to end the seller commission class action lawsuits. Now a judge has given approval to move forward…
and August 17,2024 is the date the policy changes are to take effect.
To my understanding, two key points that will effect buyers and sellers are…
A buyer representation agreement is required prior to a Realtor showing properties
Minnesota has already been using these agreements for years, but I was amazed to learn that 32 states do not have buyer representation agreements. The August 17 deadline gives about 3 months to get these agreements in place. The agreements must include details about how the buyer’s agent will be compensated.
The offer of compensation field will be removed from the MLS
Every listing in our MLS currently indicates the cooperating compensation offered to the buyer’s broker… which typically covers the compensation in the buyer representation agreement, meaning the seller typically pays the buyer’s agent compensation. If the MLS offered compensation is less than that in the buyer representation agreement some negotiation may be required, including the buyer making up some or all of the difference.
This offer of compensation will no longer be allowed in the MLS, but it does not mean cooperating compensation is illegal or unpermitted… it just must be conveyed through another medium
Bottom Line
The bottom line is it will no longer be obvious in a property listing who is paying what, and every transaction will likely involve more negotiation. I am already seeing changes in the amount of buyer broker compensation offered in the MLS, which is allowed until August 17.
- Some listings are already eliminating cooperative compensation, offering 0%… sellers are saying the buyer can pay for their own representation. It may make sense on the surface, but this additional cost could push many buyers out of the market because they simply cannot afford this additional cost.
- Typical buyer broker compensation in the MLS in our Twin Cities market has been 2.7%, but I am seeing listings reducing that amount to 2.5% to as low as 2% or lower
- Other listings are increasing the offer of compensation 3% or higher as an added incentive
Things will continue to shift as the new reality unfolds.
Sharlene Hensrud, RE/MAX Results – shensrud@homesmsp.com
