The media has been buzzing lately about the big changes in how real estate agents get paid. This issue has been around for over 40 years, tracing back to decisions made in the 1970s. Back then, sellers expected that since they were paying commissions, all agents, including the buyer’s agent, worked for them.

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This idea was flawed from the start. Most agents build a strong relationship with their buyers, and unless the agent is also the listing agent for the home being bought, they are primarily working for the buyer.

 

While removing mandatory sub-agency was a step in the right direction, the way commissions were handled on the settlement statement remained unchanged, with commissions still listed on the seller's side. This led to many agents advertising their services to buyers as "free," which is a misleading notion—nothing in business is truly free!

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This year, lawsuits have challenged the common practice of listing agents showing the commission offered to buyer’s agents through standardized MLS forms. The logic behind these legal claims can be pretty confusing.

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Starting in August 2024, new rules have come into play.

 

The MLS will no longer display the amount offered to buyer’s agents. However, this change doesn’t affect most builders, house flippers, or transactions outside the MLS database.

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The key takeaway is that buyer’s agents will now have to discuss their compensation with prospective buyers upfront and get a signature to outline these new rules. This new requirement means agents will need to have a conversation about their fees before meeting the buyer or determining if they are a good fit for each other.

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Think of it like dating: the first date is about figuring out if there's a connection and whether you want a second one. The new rule forces agents to have that "second date" talk before the initial meeting, which can be a bit awkward.

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The new system aims to ensure that buyer agents and their clients discuss compensation openly. Traditionally, sellers have been willing to pay a commission to buyer’s agents to bring buyers and work with the listing agent to finalize the sale. The issue has been the commissions being listed only on the seller’s side of the ledger.

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There is a potential downside: some buyers may be hesitant to sign anything at the start, and may choose to go directly to the listing agent. This can create a dual-agency situation, which can be complex and potentially lead to legal disputes.

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In the long run, this change will probably be viewed as a minor adjustment. Buyers and sellers will keep transacting as usual, but agents will need to adapt by clearly communicating their value and fees.

 

Buyer’s agent compensation can be negotiated in several ways: it could be covered by the seller, the buyer, or a combination of both through further negotiation. Effective communication is key to navigating these arrangements, so let’s discuss your options!