Is it the end of the world for realtors? Anyone who follows the world of real estate probably knows about the $418 million dollar settlement of the National Association of Realtors on March 15 of this year. Rampant misinformation following the decision has affected not only real estate professionals. It has found many harbingers of doom crowing about "the end of real estate as we know it." I have now heard enough misinformation that I am regularly referring inquirers to a number of resources for clarification. Here is a tidy summary from the St. Louis Association of Realtors, if you're feeling out of the loop: https://www.stlrealtors.com/news/2024/05/28/industry-updates/what-the-nar-settlement-means-for-home-buyers-and-sellers/
What's really changing - or will have the greatest effect - after July 1?
There are some notable pro forma changes, or ways of proceeding, e.g., as we eliminate advertising of compensation for buyers' agents in the MLS, and enforce the practice of having a buyer's agency agreement signed with specific and binding compensation before we are able to show homes to buyers. Buyers who know ahead of time what the services are that they will be receiving, and what the compensation is covering, are often astounded at what agents actually do on their behalf as the process of buying a home unfolds. That is really no surprise to anyone who has bought a home with the assistance of a capable realtor.
Third, and most substantively, I think it largely comes down to the financial burden on home buyers who may not be able to afford buyer's agent compensation out-of-pocket. It is not the case that many sellers will simply eliminate compensation for buyer's agents, and cut their selling costs significantly. After July 1, the MLS will not record what sellers may offer as buyers' agency compensation. Sellers will articulate clearly in their listing agreement their desire for compensating buyers' agents at a negotiable rate, and may still offer buyer concessions in the form of closing costs, for example. Sellers know it is to their advantage to have as broad a buyers' pool as possible when listing their home. Sellers also know that compensation for listing their home has always been negotiable. That's still the case. It remains to be seen whether the system of listing what that compensation is on the MLS will have the effect of stimulating conversation about negotiable rates for compensation, or perhaps cause an uptick of confusion as agents try to sort another layer of conversation before an offer is considered. Most of that will be felt by agents as "growing pains," and will likely stabilize as part of the process of change after a period of turbulence and then adaptation. We will learn from each other, and be stronger for it.
Buyers will notice the change, more likely, in the way agents communicate with them upfront. First, buyer's agency agreements must be signed prior to showing homes. This will ensure that buyers and their agents are on the same page about what compensation the agent will receive for services rendered, and again, the compensation, as always, is negotiable. This continues the practice that had already been advised and practiced widely, but is now required.
Second, agents will need to address perception, both for sellers and buyers, about buyers' agents' compensation. What might change for sellers' perception is that they are paying for the services of the listing agent, and trying to cast the net as wide as possible to attract buyers who are receiving the services of their buyers' agents. If a buyer's agent brings a willing and able buyer to the seller and is able to negotiate a transaction through closing, that is of immense value to the seller. Sellers know this, and they will negotiate the best bang for their buck when considering compensation for buyers' agents in the process.
What might change for buyers' perception? Previously, many buyers were under the impression that "it doesn't cost buyers anything to work with a buyer's agent because sellers traditionally pay the buyer's agent." Traditionally, the cost for buyers struggling to get together closing costs and down-payment has been a challenge for many trying to buy their first home. And now, potentially, they must add to that the burden of the buyer's agent compensation, which has traditionally been addressed by sellers. Sellers who have offered buyer concessions in the form of closing costs or buyer's agent compensation, in order to get their home under contract will still want to attract buyers and their representatives.
Realtors will have to do a better job of articulating their value for buyers especially, and it will be very challenging for buyers without access to financial resources, like equity in a home, to pay their buyer's agent out-of-pocket. What's changing is that it will make the process of buying a home without ready financial resources even more difficult on first-time buyers who especially need a realtor-advocate in their corner as they navigate such a significant financial investment. If they are already struggling to come up with a down-payment or closing costs, and sellers are unwilling to compensate buyers' agents, some buyers will be unable to afford to pay their own agent, their advocate. Unrepresented buyers, or under-represented buyers will not, in the long run, be great news for sellers who often desire the largest pool possible to be successful in selling their home. And of course, it's not great news for the buyers, either.
Let me say very clearly: I am not afraid for what's changing after July 1, nor am I cowed by doomsday crepe-hangers. Nor will I concede to the caricature that, in the wake of the recent settlement, realtors have been duly castigated and should run.
On the contrary, realtors who choose to continue to assist families through the significant transition that is buying or selling a home are some of the most fiercely loyal, genuinely caring, ethical, industrious, talented, optimistic, compassionate, courageous, determined, and endlessly resourceful people on the planet. They meet clients at the crossroads of questioning, discernment and uncertainty every day, hold in sacred trust their greatest fears, hopes and dreams, and for many, help them secure their most significant financial investment for their families' future. These are the cheer-leaders and drill captains who help first-time home-buyers through the morass of process and paperwork to enable some of them to do something not imagined possible, and they need the professional assistance of a realtor. These are the unsung heroes who help retirees survive and thrive in their golden years, and help families who have to move quickly, out of necessity or crisis. These are the ones who understand setbacks and disappointment and loss, and still swing for the bleachers. These are the realtors whose character and moxie in times of difficulty show families who trust them that we are their fiduciaries, ready to act in our clients' best interest before our own.
For agents like myself, it means addressing not only the uncertainties of doing business in the days after July 1, when the changes take effect, but of walking with our established and prospective clients who are asking questions, doing their best to get straight answers, and trusting us to have their back. They deserve our constant diligence, transparency, full communication, skilled competency, and understanding. They are filled with concern for their future as they navigate their real estate prospects, sometimes unclear about what the landmark settlement entails, and sometimes just afraid that the upheaval will put some of us realtors out of business entirely. It might. But until that happens, as the song goes, "I'm Still Standing."
I will continue to articulate my value as an agent who acts honorably, as a client's fiduciary, and to let my performance and service demonstrate that value. My first obligation and greatest joy is to connect all of us with the wider "We" that is our common home, and helping others find their way home where they feel safe, affirmed, connected, and loved. I see the changes as providing the fodder for great compost, and everything being churned right now just helps strengthen and nourish what's growing. I will continue to walk with clients who are navigating significant change, and changing the world for the better in the process. For me, it's not the "Real Estate-Pocalypse," just the process of composting what has been in order to let new life come, and live it fully!
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