August 2024: Real Estate Consumer Alert

It’s been an interesting week in real estate as brokerages and agents gear up for the upcoming changes brought on by the NAR Settlement. Most of my coaching and consultation calls this week focused on concerns about the future of buyer agents, post-August 17th commission discussions, and how different brokerages are navigating this disruption. 

COMMISSION + REPRESENTATION

The NAR lawsuit settlement and the resulting changes may be the most significant disruption our industry has seen in our careers. Much of the media speculation and commentary on our profession feels unwarranted and contradictory. Moving forward, we need to focus on education, higher standards, greater skills, and an elevated approach to how we operate.

Many have been discussing the recent watchdog article on how buyers and sellers should navigate the upcoming changes. Have you read the entire Consumer Federation of America August 6th press release?

CONSUMER ALERT: How Home Buyers and Sellers Can Cope with New Real Estate Broker Rules and Practices can be read here. What are your thoughts on this?

Mine are that, on the one hand, this very vocal consumer advocacy group is calling for greater control over commission for buyers and sellers to eliminate "alleged" price fixing, and on the other hand, they are telling consumers that they should negotiate a 2% commission. Is this not price fixing?

Additionally, thank goodness all service providers are not created equally! In every industry, you have those that are exceptional, and those that are not. You certainly would not pay a newly graduated law student the same as a seasoned lawyer with years of experience and a solid track record. If this is about free trade so to say, compensation should be in line with ability and results.

MOVING FORWARD WITH CHANGE

Ultimately, the settlement formalizes the decoupling of compensation, not the elimination of compensation. Many brokerages have taken a stance to preserve the current model as much as possible by encouraging sellers to predetermine and advertise, where allowed, a buyer-agent commission. Others welcome the change and see it as a path to more control for buyers and sellers. Which camp are you in and why?

My short take is that change is hard but necessary for growth. Many brokerages are taking steps to continue to pre-negotiate a buyer-agent commission with sellers upfront at the time of listing and advertising this where legally allowable. In this new landscape, this may not serve the seller that they are bound to represent.

Sellers should be willing to offer a concession for a buyer-broker commission, but I see the value in determining the amount once an offer is received.

Historically, buyer agents have relied on listing agents to pre-negotiate their commissions with the seller. This will no longer be the case. Buyer agents will need the skills to negotiate a contract with their buyers, including compensation. As professionals, we should not rely on others to negotiate our fees; we should be well-equipped to do so on our own merits!

Consumers will likely adopt a more thorough approach when seeking buyer representation, including more agent vetting and formal interviews, which will hold buyer's agents to a higher standard. This is good for consumers.

Both buyer and seller agents will need to clearly articulate how a buyer’s agent commission can be paid:

1. Buyers can pay their agent directly.
2. A seller concession to cover the buyer's agent fee can be negotiated into the contract terms.
3. A combination of both can occur.

While the settlement introduces several changes, the idea that it will eliminate buyer representation seems unfounded. Buyers have always had the option to represent themselves in a real estate transaction, just as sellers have always had the option to sell their homes as For Sale By Owner. Yet, only a small percentage of consumers choose this route. Post-August 17th, new real estate practices are unlikely to change this. 

Looking for additional support in your business as these changes roll out? Here are three ways we can help.

💡Schedule a 1:1 strategy call here.

💡Grab our fully customizable Buyer + Seller Guides here.

👇Join me for a Buyer Representation Workshop hosted by Sharran Srivatsaa. Shoot me a message, and I'll be sure you get the link to join.