September means Back to Basics here at Inman. As real estate navigates the post-settlement era with new commission rules, real estate professionals from across the country will share what’s working for them, how they’ve evolved their systems and tools, and where they’re investing personally.

Let me begin this post by stating what will be obvious fairly quickly: I’m guessing there will be a few who will disagree with what I am proposing here. Let me also state, upfront, that these are my musings, not the opinion of my brokerage, brand or our legal counsel. With that out of the way, let me share my thoughts.

I believe a significant part of the emerging issues in the aftermath of the commission lawsuits and their settlements stems from agents and brokerages trying to figure out ways around the new rules. Inman reporter Andrea V. Brambila’s post on Aug. 27, 2024, entitled “New forms aim to sidestep NAR settlement, law professor warns,” is just one example.

In my case, I have personally encountered no end of comments and tactics surrounding the purported need to convince a seller of the importance of providing a concession to a buyer with which they can compensate their agent. If you have read any of my previous posts concerning the settlement, you will know that, in my opinion, these comments skate dangerously close to steering and, in many cases, are an actual violation of our code of ethics.

We ended up in the lawsuit due to the prevailing concerns and consequent actions of the Consumer Advocates in American Real Estate to decouple commissions. In an Inman interview with Doug Miller and Wendy Gilch, the executive and deputy directors of CAARE, they outlined the following three “misleading” talking points from real estate agents:

  • “Sellers must offer money to buyer brokers (off the MLS) or buyer agents won’t show their houses.”
  • “Buyer agents won’t show houses to buyers unless there is an offer of compensation from listing brokers because they are not going to show houses unless they get paid.”
  • “They’ve created a checkbox to continue steering, but blame it on being a fiduciary to the buyer.” 

There is no question that MLSs, brokerages and their legal counsel are scrambling to figure out the way forward, with changes and revisions to the order of the day. It is interesting to note that in my post on Aug. 27, 2024, entitled, “What homebuyers can expect now: Mandatory consults, exclusive reps,” I wrote, “Many MLSs have adopted a new field that allows for a Yes or No response to a seller’s willingness to provide a concession…”.

Later that same day, our local MLS, which up to that point had provided such a field, stated, “After listening to feedback from our members regarding the recent change to make the “Concessions Considered” field mandatory, we will be removing the ‘Concessions Considered: Yes/No’ field from Listing Entry, effective Tuesday, August 27.”

Given this new reality and understanding the desire of the settlement to effectively decouple commissions, I recommend we stop having traditional conversations with our sellers concerning providing a concession to a buyer for their agent’s commission. 

Since there is going to be, going forward, a “witch hunt” of sorts for listing agents misrepresenting the truth to their sellers and buyer agents purportedly steering clients away from listings that supposedly provide less than the agreed-upon compensation, I believe there is a simple solution. 

We stop trying to pre-negotiate with our sellers any concession to a buyer from which they can pay their agent

That is, in fact, what Miller and Gilch have been lobbying for. Rather, in a listing appointment you should focus on the services you offer and the fee you will charge to list and market their home, keeping in mind that everything is negotiable.

Unfortunately, instead of focusing on their own fees and services, we are seeing listing agents trying to pre-negotiate the fee a seller may be willing to offer to a buyer’s agent as a part of their “value-add” as a listing agent. Put another way, they are saying, “Choose to work with us and you will only have to pay _____ percent or a flat fee of $_____ to any buyer’s agent.” Then they have to figure out some way to communicate to prospective buyer agents the level of compensation they are willing to pay.

If more than one listing agent is giving this spiel during their presentation, the seller may be given the wrong impression that their purported fee to a buyer’s agent may be less based on who they hire to list their home. That is, in fact, a complete misrepresentation of the facts and in and of itself could be considered steering. 

The irony here is that this behavior from listing agents attempts to remove the buyer’s ability to negotiate the compensation they may be willing to pay their agent, which was one of the major tenets of the settlement. This point is made by Miller, who states, 

“For decades, I have had clients complaining about this commission structure and that it seemed unfair for a seller to have to pay this. Realtors would go to them and say, ‘The reason my fees are so high is because I have to share my commission with a buyer’s agent.’ And the question would be, ‘Why? Why do I have to pay a buyer agent to negotiate against me?’ And they were told, ‘That’s the way it’s done.’

But unfortunately, the impact of paying a buyer broker creates a lot of conflicts. No. 1, you’re paying somebody else’s fiduciary to procure a ready, willing and able buyer for the seller. That’s a duty to the seller. You shouldn’t be having duties to the seller if you’re a buyer agent. So it’s an automatic conflict of interest.

No. 2, it eliminates the possibility that the buyer brokerage fee is going to get negotiated with the principal in the transaction, which would be the buyer. Buyers should be able to negotiate the fees of their own agent, but if it’s being preset by the listing agent, who is also a buyer broker half the time, that buyer is never going to have an opportunity to meaningfully negotiate that fee.”

I believe that going forward in the new reality, there will be too many variables to nail down a set fee from a seller. 

A few examples could be: 

  • A buyer may be willing to increase the price they are offering in return for a concession for their agent. 
  • A buyer may have been able to negotiate a low fee with their buyer’s agent who could potentially end up with less than a seller is willing to pay. 
  • A buyer may be willing to cover their agent’s fee with no regard to what a seller may be offering. 
  • A seller who has stated they will not provide any concession may only get one offer that (i) includes a request for compensation and (ii) will disappear if the seller attempts to counter the concession out. 
  • A seller may get multiple offers all of which include requests for compensation which can be countered lower in a multiple-offer scenario. 

The list of possibilities is endless. 

Additionally, regardless of any pre-negotiated fee or percentage a seller may be willing to offer, the new rules provide a buyer with the ability to include a request for compensation regardless of what a seller may have stated they are willing to offer. Which then begs the point, “Why bother?” 

Consequently, I do not believe that going forward, pre-negotiating a set fee structure should be any part of a listing presentation.  

We explain a few potential compensation scenarios to a seller and then leave the negotiations to the time when we actually have an offer on the table

Sellers are going to want to know how the new rules work. That is normal and fine, assuming we provide accurate information. Some sellers, based on the ridiculous and blatantly false national news media coverage around the settlement, are going to assume that they no longer need to pay any commission to a buyer’s agent.  

These assumptions need to be countered with the truth of the new reality so they can then make informed decisions. In truth, the only real answer is, “We do not know whether or not a concession will be required. Once an offer (or offers) arrive, we will see what the buyer(s) are offering and then, based on the terms included in the offer(s), I will negotiate on your behalf to arrive at an agreement that works for all parties.”  

Consequently, in my opinion, the only conversation you need to have with your seller during the listing appointment should be as follows: 

  • “You are no longer required to provide a pre-determined compensation for a buyer’s agent. In fact, there is no longer a field on the MLS to show what that compensation could be and there are now very strict rules around how any such fee may be communicated to a buyer’s agent.” 
  • “Even if you pre-set a fee or choose not to provide any concession, a buyer has the right to include a request for compensation in their offer regardless of what you might or might not be offering.” 
  • “When you receive an offer, it is possible it will contain a request for some form of concession to a buyer from which they can compensate their agent. Since we do not know in advance what that might be, once an offer arrives you will have the opportunity to negotiate any and all of the terms of the offer(s) in a counteroffer to the buyer. Once we have an offer(s), based on what they may or may not be requesting, we will discuss your options and then respond accordingly.” 

At the end of the day, I believe we are making this way too complicated. Since the intent of the settlement was to decouple commissions, let’s do it and quit trying to come up with workarounds that, at the end of the day, might result in some serious fines and possibly our own day in court. 

This post was originally published on this site