In Part 8 we enter the meat and potatoes part of the real estate commission lawsuit series. What will happen in the future? What will happen to buyer agents? Will they be forced out of business? What should we do?
Time will tell – we don’t really know what will happen with buyer agency and buyer agents. There are “experts” on both sides who predict that nothing will change or that as many as 80% of buyer agents will leave the industry. Best guesses.
The Critical Event – the settlement agreements, especially the NAR settlement, are shaping up as the critical factor that will impact buyer agents. The biggest variable is whether the court will ratify the settlement agreement as is or if it will be amended.
What to look out for? – There are three potential ways to change the clear co-operation rule – keep co-op commission but remove it from the MLS, prohibit listing agents from offer co-op commission but allow sellers to do so directly, or decouple buyer commission completely.
NAR’s Proposal – Easy like Sunday morning. NAR proposed only prohibiting the posting of co-op commission on the MLS. Almost business as usual. All that will change is that co-op commission can’t be offered on the MLS (or a website that uses MLS data). No biggie.
The Middle Ground – if listing agents are no longer allowed to offer co-op commission but sellers can still offer to pay the buyer agent, this will have a limited impact on buyer’s agents. Some sellers will offer no co-op commission, but that’s OK.
The Knockout Punch – If the DOJ prevails, neither the listing agent nor seller will be allowed to pay the buyer agent and only the buyer will be able to pay the buyer agent. This will completely decouple listing and buyer agent commission. SUPER BAD.
Listing agents will steal your buyers – in other countries, listing agents end up stealing all the buyers. They do so by letting the buyers know they don’t need a buyer agent as the listing agent, at no cost, will handle the paperwork and transaction management.
Here it comes – keep a close eye on your local market for listing agents touting reduced commission. It will look something like “Save thousands. 3.5% listing fee”. This will be the first wave of listing agents cutting out the buyer agent.
Buyer Agents Fight Back – there is nothing so far to prevent buyer agents from submitting an offer that requires the seller to pay the buyer commission. The seller can say yes, no or negotiate. In hot seller markets they’re more likely to say no.
Exclusive Buyer Agency – NAR has proposed that you can only show homes if you have an exclusive buyer agency agreement with a buyer. This will have an immediate impact as many buyer agents currently show houses without a representation agreement.
The Buyer Says No – what if the buyer doesn’t sign the exclusive agency agreement? Does this mean you can’t show a listing? The buyer can just call up the listing agent. The listing agent will love this. Tough luck for buyer agents.
Sign Crossing – if the buyer signs an exclusive buyer agency, the buyer can only work with one buyer agent. Right now, it’s not uncommon for buyers to float between buyer agents without a representation agreement. Watch out for sign crossing!
Skill Up – buyer agents need to skill up in two main ways – think about focusing on being a listing agent (listings will rule) and/or nail their buyer listing presentation. Explain your value. This is real estate 101 for listing agents, who do it every day.
Adapt Compensation Model – this is also an opportunity for buyer agents to adapt their compensation model. Sign-up retainer. Fixed fee. Hourly rate. A mixture of all. Be flexible and adaptable. Some buyers just won’t have the cash beyond the down payment and closing costs.
