Realtor Comments on NAR Settlement
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Agents’ Comments on New Rules
Lance asked how the new realtor rules were affecting agents – here are responses from around the country that I clipped from two different email threads. Thanks Lance!
None of Their Business
Will listing agents demand to see the buyer-broker agreement just to show a house?
Agents are known to have their own interpretations of the rules – one listing agent already said that it is against the rules to ask her if her seller is paying concessions – so it is probably inevitable that some will think it is another way to screen out showings to people they decide aren’t worth the trouble.
In California, for instance, the California Regional MLS (CRMLS) has responded to the settlement with Rule 9.1, which governs “selling procedures.” While this rule clearly outlines the buyer broker’s obligations with respect to representation agreements, it does not impose any additional requirements on a listing broker to verify the presence of such agreements. In fact, the rule explicitly states, “Nothing in this policy shall impose any restriction or requirement upon the Listing Broker.”
Though it is advisable to review the specific rules of your local MLS — since these can vary — it appears that, at least in California, listing brokers are not obligated to confirm the existence of a signed buyer agreement. That said, some brokers may choose to implement internal policies requiring their listing agents to inquire about buyer agents’ compliance with these requirements as part of their due diligence process. This could include adding a step to their listing checklist to ensure that all parties are acting in accordance with the new rules.
It’s worth noting, still, that if not mandated by MLS policy or regulated by law, any inquiry or request for proof of a buyer agreement by a listing agent might not always be well-received or even acknowledged by a buyer’s agent. Nevertheless, if a listing agent suspects that a buyer’s agent is not complying with the new requirements, they may choose to report the issue to the relevant MLS or their local or state association.
In summary, while there is no formal requirement for listing agents to verify the existence of a signed buyer agreement, some licensed practitioners may adopt this practice as a precautionary measure. As the industry adapts to these changes, peer enforcement is likely to become more common, as accountability among NAR members and MLS participants will be increasingly expected.
Newer Agents
It’s going to be tough on the newer agents going forward.
The commission lawsuit stuff isn’t the big concern. Sales are likely to keep dropping, and at the same time the better agents are picking up market share. There aren’t enough sales to go around for every realtor to pick up an occasional sale, let alone make a living.
If you’re an agent and you find yourself saying to prospects, “Let me know if you have any questions”, then there are things you can do to up your game.
The best thing you can do is immerse yourself in the Dale Carnegie Sales Course. I completed it early on, and it made all the difference.
Embrace your only job, which is to say the right things, the right way, at the right time.
It never fails when I’m doing open house, and I’m talking it up with attendees.
When I ask them, “Would you like to buy it”, it gets a chuckle every time because they have never heard that before at an open house. We are supposed to be professional sales people, yet consumers have never heard an agent ask them if they want to take action.
If you catch yourself wanting to say, “Let me know if you have any questions”, just know you need to be more creative. Try out my two favorite open-house questions, and use them early on, not once they have seen the house and are heading for the door:
- Have you been looking around much lately?
- Have you seen anything you liked?
Their answers to those questions will send you down a natural path of other questions that reveal where they are in the process.
If they say, “Oh, we’re just neighbors”, that’s fine.
Resist the urge to hit them with, “Are you thinking of selling?”
A consultant would say, “Have you thought about moving?
Every homeowner has thought about selling, and getting their hands on the money they have tied up in the home’s equity. But when they think about moving, it thrusts them into the Big Three: Going through all the stuff, fixing up the house, and where to go.
Listen carefully to their response, and then say, “If you could get assistance with all three of those things, would it be helpful?”
Come work with us – I’ll teach you the ropes.
Love Letters Are Back!
I love this new change – the sellers get to choose whether or not they get to receive love letters from buyers with their offers. Buyers should be given every chance to compete for the win, and submitting an introductory letter with photos of the kids and dog is a great way to influence the outcome.
Love letters work!
Sellers like to know about the buyers because they want their family homestead to go to someone who will adore it like they do. In a close race, a strong love letter can make the difference between winning and losing! I recommend that every buyer submit one.
Listing brokers, particularly Redfin, get all weird about discrimination and they refuse to give sellers any love letters submitted. But sellers should be making that decision, not the broker. Everyone is googling everyone anyway – there are no secrets!
Be careful if you are a mixed-race couple or minority though. I’ve had it happen twice when my minority buyers offered on multi-million-dollar homes. They offered the exact same price as what the sellers took, but we didn’t get a counter. In both cases, the listing agent had met my buyers. Did they influence the outcome? Why else would they just kick us to the curb when offering the same?
New Forms Tomorrow
The California Association of Realtors had to re-write a few of their new forms in order to comply with the DOJ critique. These revised forms get released tomorrow, and they will probably help chart the final path for buyer-agents.
There are two noteworthy points in them.
1. The old listing agreement mentioned the full commission rate the seller would pay at closing, and then in a separate paragraph at the bottom of the same page, it listed how much of that full commission that would be paid to the buyer-agent. The second rate was determined by the listing agent with little if any involvement of the sellers.
The new listing agreement will dictate the commission rate the seller will pay at closing for seller representation only. There won’t be any mention of the seller paying the buyer-agent.
But there will be a second paragraph where the listing agent can add an additional fee for handling the extra work created if the buyer is unrepresented.
In summary: Agents who only use the basic listing agreement can completely ignore buyer-agents, and can also tack on an extra rate or fee for bringing in unrepresented buyers. It will encourage single agency, and buyers will really have to be committed to getting good help!
2. If the listing agent is committed to having their seller offer “concessions” to a buyer that may be used towards a buyer-agent commission, they will need to include a separate and optional form. The form will ask the seller if they want to offer concessions (Yes or No), and if so, how much do they want to offer.
Ed Zorn is the vice president and general counsel of CRMLS, the largest MLS in the state. When asked about the concessions amount, he said sellers should not ‘commit to any kind of number whatsoever.’ Our Compass management agrees.
To the ivory-tower folks, not offering a specific commission rate to buyer-agents sounds safe and compliant. But it will expedite the death march of the buyer-agent.
The listing agreement will be encouraging single agency and if a buyer-agent can find their way to the negotiating table, there won’t be any guarantee of the seller paying anything towards your commission.
Literally, there was a chance for this to all work itself out by using concessions to pay buyer-agents. But everyone is so nervous about future litigation that these revised forms will lead us down the path of eliminating the buyer-agents. Single agency is upon us!
Owning Manhattan
The other real estate reality shows are so full of drama that they are barely watchable. While they do pack some drama into Ryan’s new show, Owning Manhattan on Netflix, they mix in a few examples of him doing a masterful job of negotiating between agents and principals to make deals. Specifically, listen to his verbal discipline when talking on the phone – Ryan says very little, and keeps all the attention on the price – no stories or verbal vomiting.
He demonstrates a realtor’s most important job:
Say the right things, the right way, at the right time.
And he could give you the list of the things to say – it’s saying them the right way, at the right time that makes the difference between highly productive agents, and the rest.
He makes it look easy, but the mental discipline to gently yet succinctly assist people with making the right decisions is an art form and extremely uncommon.
I watched the eight episodes that have come out and thought Ryan’s negotiating was the most accurate representation of high-level agent deal-making that has ever been documented. Ryan also loses three key agents during the first season, which is another part of the business – agents are known to move around, and aggressive recruiting (particularly by Compass) is a constant threat.
This is just the trailer – if you are an agent or big fan of real estate, watch the whole series:
Floyd Wickman said it best. Don’t sell with blah blah, when you can sell with blah.
Oh, the 5-offer bidding war with my buyers? After a week of kicking it around, the listing agent finally called last night. Her sellers decided to not conduct a legit bidding war (even though the listing agent had promised it all week) and instead they sold the house to a neighbor at an under-market price.
It was a great example of how most potential bidding wars get botched by amateur listing agents. The realtor doesn’t take control of the situation and it just goes where it goes – and buyers get screwed.
Buyer-Agent Commission Solution
Hat tip to Carl Streicher, mortgage broker, for sending over this handy chart on allowable concessions, also known as seller contributions. This is how the buyer-agent commission can be included as a part buyer’s mortgage package, even if the seller didn’t sign the optional form with his listing.
If the buyer-agent writes the offer with a 3% or 4% seller contribution to the buyers’ closing costs, then the commission can get paid plus cover some or all of the buyers’ other closing costs too. Sellers typically want to offset with a higher price to compensate, which can make the appraisal more challenging, but once the home has been on the market for a few weeks maybe the seller will take less?
This is the reasonable solution that can solve everything.
Prior to the Frenzy, seller contributions were more common, especially with first-time homebuyers who were tight on cash. But concessions all but went away once bidding wars started breaking out everywhere. If there are multiple offers now, the ones without a request for seller concessions will probably float to the top of the pile.
Why am I skeptical?
Three reasons:
- Sellers will have already been told that they don’t have to pay for the buyer-agent.
- If there is another offer that doesn’t request a concession, then it will likely be favored.
- The seller and listing agent will want to negotiate the amount.
You would think that sellers could just focus on the amount of their net proceeds, but some get weird about paying concessions. If the listing agent is experienced/strong and wants to stand by his fellow agents, then he will explain it in a way that the sellers see the obvious benefit – it gets your house sold.
But it’s not a slam dunk. At least not yet, though a solid advertising campaign by NAR and CAR could go a long ways to making it the palatable solution for everyone in America to transact the same old way that we’ve been doing it for 100+ years.
Read the Contract!
This business used to be civil.
It was probably obvious that the contracts were drawn up by the realtor attorneys to protect realtors, but there were adequate protections for buyers and sellers too.
This commission lawsuit has changed everything, and now they only care about the realtor associations.
When Docusign pioneered the electronic signature, it was one of the best advancements in the history of real estate. But it causes clients to whip through the signing process without having to read anything! The attorneys make it worse by originating new forms every year, and currently a seller has to initial or sign 18 pages to list their home for sale, and a buyer who makes an offer to purchase has to sign or initial 28 pages!
The coming changes are going to add another half-dozen pages to each, and you better read them now!
BUYERS – You have to hire an agent to see homes for sale, which means signing a contract. It sounds ridiculous, which it is, but we are going to have to get used to it. The key part is how long the buyer is obligated to the agent.
If you don’t read the contract and just sign it real quick, you could be obligated to pay this agent a commission whether they represent you or not when buying a home. Buyers should only agree to sign any buyer-broker contract if it includes a cancellation clause so you can get out of it if things don’t work out.
SELLERS – The basic listing agreement won’t allow you to pay an incentive to a buyer’s agent. Your listing agent will have to include a optional form and have you agree to pay “concessions” which can go towards any buyer expense. I’m guessing that this form won’t be used much, and instead the listing agents will want to be heroes and tell their sellers that they get to save money now because they don’t have to pay buyer-agents any more – even though it’s going to kill the business as we’ve known it for 100+ years.
It may sound like a good idea to not pay buyer-agents in the beginning, but if your house hasn’t sold for weeks or months, you might reconsider. Paying incentives to get what you want is an American tradition.
AGENTS – You better be committed to getting paid, because everyone is going to be looking to screw you out of a paycheck – especially the other agents. The MLS used to protect buyer-agents because once a commission rate was entered onto a listing, the seller had to pay it. The rate was protected, and it became accepted as part of the package.
But it’s going to be different now, and the buyer-agents who include their commission in their offer to purchase will be under attack. If you make an offer that is less than the list price, the first thing the seller will want to do is pay you less, and I doubt that the listing agent will stand up for you. I can imagine it already from listing agents – “Ok, we accepted your buyer’s price but we’re not going to pay you anything!”
It means that any buyer-agent who wants to be paid will have to get it from their buyer. It will be another huge burden loaded onto the buyers, and only the most motivated will endure paying the same fees to which we have become accustomed.
So hey, maybe agents won’t get paid as much, but selling homes is going to be a mess – unless buyers can find a way to Get Good Help!
Single Agency Is Upon Us
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!
Jim Klinge
Klinge Realty Group
Broker-Associate, Compass
Are you looking for an experienced agent to help you buy or sell a home?
Contact Jim the Realtor!
- 682 S. Coast Hwy 101, Suite #110
Encinitas, CA 92024 - (858) 997-3801 call or text
- klingerealty@gmail.com
CA DRE #01527365, CA DRE #00873197
