Due to expected scrutiny from the DOJ, the California Association of Realtors has abandoned buyers, and the buyer-agents. If a listing agent wants to include paying an incentive to buyer-agents, not only do they have to convince a seller that it’s a good idea, but then they have to use an optional form and NEVER call it a commission. Beginning on July 24th:
The Residential Listing Agreement will no longer provide for any offer of compensation from the listing broker to the buyer’s broker. C.A.R. confirmed that they will no longer facilitate broker-to-broker compensation agreements. The Cooperating Broker Compensation Agreement is being retired and will no longer be part of the C.A.R. forms library; the same applies to the Anticipated Broker Compensation Disclosure. The message is clear: C.A.R. will not produce/provide any forms related to broker-to-broker compensation.
The newly revised RLA will only include the agreement between the seller and the listing broker as it relates to compensation. The option for the listing broker to charge an additional fee if the buyer comes to the table unrepresented will remain. This option is available to account for the additional work that may be required of the listing agent when buyers elect to self represent.
In transactions where a buyer is unrepresented it is imperative that the listing agent not act as a fiduciary. The Buyer Non Agency Agreement form must be provided to and signed by the buyer. It is important that listing agents are careful with their words and actions, so as not to imply a fiduciary relationship with an unrepresented buyer.
As it relates to concessions that a seller may wish to offer to a buyer, the listing agreement will not specifically reference such offers. However the Multiple Listing Service Addendum includes the concession language. Paragraph five of “MLSA” will inform the seller as to the option of offering a concession to the buyer. The default will indicate that there are no concessions, however, there will be a checkbox in paragraph 5B2 wherein the seller may agree to consider a concession to the buyer to be used toward the buyer’s closing cost. No amount, either flat fee or percentage, shall be stated without the express written consent of the seller.
It is important to remember that concessions may not be designated for commission rather they are a seller to buyer offer extended solely to assist a buyer with closing costs which may include a variety of fees including broker compensation.
First, the National Association of Realtors botched the defense of buyer agency – allowing the world to believe there has been a conspiracy to inflate commissions – which could not be further from the truth. Now the California Association of Realtors has caved to the implied DOJ threat and revised all their forms to cover themselves, instead of fighting for buyers and buyer-agents. They didn’t even try to fight it – they just caved and revised their forms instead and expect agents to adjust.
In addition, the new listing agreement won’t mention any buyer-agent compensation, but it has a paragraph for the listing agent to include more pay for handling the unrepresented buyer without providing any fiduciary duty. The form is promoting single agency!
This is a disaster. Buyer-agents will be expected to convince buyers that they need to commit in writing to paying the buyer on-agent commission before buyers even find a house. They don’t think they need help finding a house – they have access to Zillow.
They will go direct to the listing agent instead.
SINGLE AGENCY IS UPON US – IT IS HERE, STARTING AUGUST 17TH AT THE LATEST.
It will be the worst thing to happen to real estate ever, yet outsiders will claim that they got commissions reduced so it worked and everything is fine.
Sales will plummet the rest of the year – I guarantee it – but we won’t know if it’s due to buyers waiting it out and/or not knowing what to do, the insane political circus that will only get worse, or if home prices and rates are too high. But that is a wicked triple threat!
Hello all,
Ahead of the August 17 implementation of NAR’s practice changes, we wanted to provide a few reminders of actions that are required to obtain a release of liability and protect your organization from claims related to broker commissions:
We recommend all MLSs implement practice changes by August 17. REALTOR® MLSs (those owned exclusively by one or more REALTOR® Member Boards) must implement the changes by this date to remain in compliance with NAR policy.
Offers of compensation are prohibited on MLSs. Offers of compensation will continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. Offers of compensation help make homeownership and the benefits of professional representation more accessible to buyers, including first-time homebuyers, increase homeownership opportunities for historically underserved groups, and benefit sellers by expanding the potential buyer pool.
Agents working with a buyer must enter into a written agreement before touring a home. Ahead of August 17, NAR encourages all members to address form changes and prepare to educate real estate professionals and consumers about revised forms. NAR policy does not dictate terms of buyer agreements, but NAR has created resources to assist with implementation of the settlement terms—such as tips on clarity and emphasizing consumer choice—including our “Written Buyer Agreements 101” resource, available here.
The practice changes are detailed here, and clarifying information is available in our FAQ on facts.realtor. For additional updates, please watch our latest legal update video: NAR’s Upcoming Practice Changes and Recent DOJ Engagement.
Thank you,
Katie Johnson NAR Chief Legal Officer
Key point: Up until now, the industry standard has been that buyer-agent compensation will still be allowed – just write it into the purchase contract.
But when listing agents pop open the new form on July 24th, there won’t be any mention of the seller paying the buyer-agent commission. The implied amount will be zero.
When a buyer-agent submits an offer to purchase that includes his/her commission, the seller will negotiate a higher price and lower or no commission to the buyer-agent. It will be the first they have heard of paying a buyer-agent, and there will always be reluctance to do so.
NAR and CAR have compeletely abandoned the buyer-agents. They deserve to be sued for not doing soemthing more to protect buyers.
How is this good for the purchaser of a home? It’s not. Pure and simple. “Buyer beware.” There are some nasty listing agents out there.
Is there anyway to enter a buyer’s agreement for a certain percentage of the sale amount and not compensate the buyer’s agent unless a sale occurs.?
What are the prevailing seller’s agent commissions these days?
Caveat Emptor
Still get good help buyers.
Is there anyway to enter a buyer’s agreement for a certain percentage of the sale amount and not compensate the buyer’s agent unless a sale occurs?
If the buyer checks the box that allows for the agreement to be cancelled any time, then yes. A buyer can wear out a buyer-agent for months and then cancel without owing them anything.
How many times will an agent do that? Hopefully, not more than once.
There are some nasty listing agents out there.
Unfortunately, the most suseptible buyers will be the most abused. The listing agents will hide behind the Unrepresented Buyer = No Fiduciary clause and say,
“Hey – you didn’t want to pay a commission to Get Good Help so you got what you got. If you overpaid or bought a turkey, too bad, it’s on you.”
It will be the worst thing that ever happened to real estate sales.
The whole mess just feels like a courtroom proceeding where only one side has a lawyer.
Yes, lawyer and whipping boy. If you don’t like the arrangement, the listing agent will be happy to scold you that he will take it to somebody else if you don’t hurry up and sign.
From the local MLS today – agents have to acknowledge this before they let you use the MLS:
IMPORTANT – Compensation Fields Being Removed on 8/13
It remains our highest priority to ensure CRMLS users adapt to thrive in our rapidly evolving environment. With a forward-thinking approach, CRMLS has been preparing for the upcoming changes resulting from the proposed NAR settlement for quite some time. Rest assured, we’re here to make certain you are fully aware of what’s to come.
ON AUGUST 13:
Compensation fields will be removed from Matrix, Paragon, and Flexmls
New CRMLS Rules and Policy changes will go into effect
The current required concession field at Close will include a category list
1. Why is Compensation being removed from the MLS?
NAR agreed to settle the Sitzer/Burnett case regarding commissions in the MLS. The draft agreement will settle claims against many organizations including all multiple listing services owned by REALTOR® associations – this includes CRMLS.
To remain compliant with the settlement, CRMLS must remove all Compensation fields from the MLS. Compensation negotiations will not be allowed in the MLS in any way, shape, or form.
2. What happens to my active listings on 8/13?
Compensation fields/information for the following listing types will be ELIMINATED and no longer visible:
Coming Soon
Active
Hold
Withdrawn
3. What listing types will be saved for historical purposes?
Compensation fields/information for the following listing types will REMAIN for historical purposes, but will not be able to be edited or changed:
Active Under Contract (unless it moves back to Active)
Pending (unless it moves back to Active)
Closed
Expired
Cancelled
4. Are there new C.A.R. forms?
C.A.R. has postponed the release of updated forms. We will keep you updated on when the forms will be released.
5. How will I get paid once the Compensation fields are removed?
There are different methods for a Buyer’s Broker to be compensated. A frequently used method is when the buyer includes a term in the offer stating the Seller will pay the Buyer Broker fee. Assuming the seller agrees, the Buyer Broker fee becomes part of the complete purchase agreement. Additionally, if using the C.A.R. Residential Purchase Agreement and Joint Escrow Instructions (RPA), the payment would also become part of the Escrow Instructions.
6. What CRMLS Rules & Policy changes will go into effect on 8/13?
In adherence to the NAR MLS Policy Changes, CRMLS must enforce new Rules & Policy changes including:
Rule 7.15 – Unilateral Contractual Offer will be renamed and revised to No Offers of Compensation in the MLS
Rule 7.19 – Changes to Offer of Compensation to All Broker Participants has been renamed and revised to No Disclosure of Listing Broker Total Commission
Rule 9.1 – Showing and Negotiations has been renamed and revised to Showings.
Note: A signed Buyer Broker Agreement will be required before showing a property.
This is just a short list of changes. To view all CRMLS Rules & Policy changes that go into effect on 8/13, click here.
7. What changes are happening to existing reporting requirements for seller concessions at the Close of a transaction?
We are upgrading the process of collecting seller concession information at the Close of a transaction. Although concession information has always been required and recorded at Close, as of August 13th, we will require a category breakdown of how the seller concession amount was used. The following required concession fields will be added at the Close of a transaction:
Closing Costs (escrow and title fees)
Property Improvements (repairs and upgrades)
Financing Costs (loan origination and discount points)
Buyer Broker Fee (amount the seller paid directly to the buyer’s broker)
Other
Total Calculated
8. Are Concessions just a replacement for Compensation?
No, they are fundamentally different. Concessions support the new consumer-centric model by allowing the BUYER to choose how the money is spent. Review this short Concessions vs. Compensation video.
9. How can I ensure I am staying up-to-date on all upcoming changes?
CRMLS has designed a robust Resource Center to provide information on all items mentioned in this email, and more. Bookmark the page and visit it frequently.
One thing that isn’t clear is whether the listing agent is required see a copy of the written buyer-broker agreement before allowing the buyer to see the home.
Even if it’s not required, I guarantee you that there will be listing agents demanding to see a copy just to mess with you. No other reason.
Should I ever (unlikely) choose to list a property for sale I will start an open auction bidding process for the “best” seller’s [listing] agent to win the honor to sell my house.
Think about this. No more buyer agent compensation so why not let the potential seller agents fight for the listing.
As a listing agent, I’m going to offer my auction format as my primary service to achieve a top-dollar sale for you. It is the best way to single-agency a house, and represent the seller only.
Come one, come all…step right up and bid. If you chooce to employ your own buyer-agent, then good for you (and you should).
P.S. Auction services cost more.
Jim, I think you are also right with your prediction that this will act as another drag on home sales when the market shifts. Gonna be confusing for buyers, and ugly.
Thanks George and I agree. If sales are half of what they used to be then we survived.
What a disaster Jim. Nobody has their finger on the pulse more than JTR. As a fellow agent, I read Jim’s blog because he truly knows the business inside and out, is always one step ahead, and is truly one of the good ones. Why would I post on another agents blog? More agents should read Jim’s blog. I’ve often mentioned Jim should be the CAR or NAR President. But I digress- why would he jump into that lion’s den? LOL.
Thanks Paul – I’ll let the usual knuckleheads be president!
Is single agency nationwide or just California?
Single agency is just the name I’m using for it.
I should be more specific though.
It is seller agency, and buyer is on their own unless they pay for their own representation.
Is it just California or nationwide?
The settlement is nationwide.
I think the trend of buyers going direct to the listing agent to avoid paying the buyer-agent commission will be nationwide.
If the sellers paying the
commissionconcession catches on, then buyers will get their representation and it will go back to normal. I am skeptical of it catching on, but I hope if does.