I got quite a few emails with questions regarding the settlement following my last story on the National Association of Realtors' settlement, so I wanted to at least acknowledge our great audience by attempting to answer some of the questions received. Still, most of the answers tend to be "we will see."
Q: With the settlement do buyers now have to pay for their own representation?
Possibly. Nothing with the settlement has been finalized, but it appears that listing agents won't have a "box" or "line item" to include cooperating broker compensation in the MLS going forward. My opinion is that removing this piece will not in fact remove cooperating broker compensation, but rather add an additional step or two. In one scenario a broker calls the listing broker simply to ask what the cooperating broker compensation is, or perhaps the cooperating broker compensation will be negotiated through the sale in the form of a seller concession. For now, I'm speculating.
Q: If buyers must pay for their own agents, won't most choose to go unrepresented?
A great question; unfortunately I don't have the answer yet. Sure, some may opt to go in alone — that can and does happen right now. Nobody's ever been forced to use an agent to buy or sell property; it just so happens that most choose to be represented. Kind of like how you're allowed to represent yourself in a court case, but most people opt to have an attorney represent them (yes, lawyers have much higher education requirements and barriers of entry than real estate brokers). I certainly have concerns about how something like this may impact those struggling already to purchase a home and now they must choose between paying an expert for their assistance or risk making a mistake that could wind up costing you thousands in earnest money or lawsuits. The other risk buyers could face is relying on the listing agent for advice throughout the transaction, which brings up dual agency (when an agent represents both the buyer and seller in a transaction) or potential ethical problems with relying on an agent who has no duty to represent you or your interests. What could go wrong with that?
Q: Are buyers' agents going to go away since they seemingly won't get compensated now?
No, I doubt buyers' agents will go away. I think buyers' agents will be mostly compensated in a very similar situation. Over the six years I've been licensed, I've represented buyers purchasing a property and have been paid several different ways. The most common is a percentage offered by the listing agent for bringing in a buyer. Having reviewed my own transactions, I've been paid between 1.5% and 3%. There have also been land purchases in which I was paid a flat fee — more than 3% of the property sale price, due to the low price of the land along with the fact that land transactions tend to be far more labor intensive in terms of due diligence.
I'm all for transparency in a transaction, but I also have concerns about unintended consequences and how those might impact both buyers and sellers. But until we have an official ruling from the Department of Justice on the settlement, we'll just continue to operate. Thanks everyone for your great questions — please reach out to me, [email protected] with your real estate related questions!
