BIG Changes Happening in Real Estate.
A new era has emerged in how real estate agents represent buyers and sellers. One of the most significant changes is that agents can no longer show homes to buyers without a buyer’s agency agreement in place. There are two forms we use for this: a short form, typically used when showing a single home, and a long form, which is more detailed and covers a broader market area, such as a specific school district or community, when showing multiple homes.
You might be wondering why these changes are happening. The shift largely stems from a lawsuit filed by sellers in the Midwest and beyond, who claimed they were unaware that they were paying a buyer’s agent. However, in Texas, we’ve always used forms that clearly state that the compensation paid to the listing broker would be shared with the buyer’s agent who helped secure the sale. The percentage or fixed fee charged to the seller was always negotiable and clearly outlined in our agreements, even specifying whether we would share compensation with buyer’s agents within or outside our MLS. How much clearer could it be?
Unfortunately, the lawsuit targeted the National Association of Realtors (NAR), alleging violations of antitrust laws and price fixing. Because membership in NAR is mandatory for Houston MLS system participants, we’ve been swept into this lawsuit, facing fines and the need to comply with a host of new rules. The U.S. Department of Justice is now enforcing these regulations, imposing fines on those who don’t comply. As a result, we’re adapting to new forms and rules that are constantly evolving as we encounter new situations that require further clarification in our agreements to prevent misunderstandings and potential lawsuits.
Now, the first step before showing a property is to have a buyer’s agency agreement in place. Some appointment services even ask if this agreement is signed before allowing us to make an appointment. Next, we contact the listing agent to confirm the compensation offered to the buyer’s agent. Sellers can decide whether to share the listing agent’s compensation with the buyer’s agent, offer a separate compensation to help buyers cover closing costs, or refuse to pay anything towards the buyer’s agent. It’s important to note that whatever compensation is outlined in the buyer’s agreement takes precedence. For instance, if a buyer agrees to pay their agent 2%, but the seller offers 3%, the buyer’s agent can only collect 2% at closing unless the agreement is amended before making an offer.
In my 43 years in real estate, I’ve witnessed many changes in representation agreements. When I started in 1981, both the listing and buyer’s agents represented the seller, with the buyer’s agent acting as a sub-agent of the listing agent. This created discomfort for buyers, leading to the advent of buyer’s agency, where buyers sought full representation. Although buyers gained their own representation, sellers were still typically expected to cover the buyer’s agent’s compensation. Dual agency, where one agent represents both the buyer and seller, also existed but fell out of favor due to concerns about serving “two masters.”
Eventually, intermediary relationships emerged as a solution when an agent represented both parties in a transaction, whether it was the agent’s own listing or another listing within the same office. In some states, agents act as intermediaries without representing either party, facilitating transactions by bringing buyers and sellers together but not representing either side. These types of arrangements, known as transactional, are rare and primarily focus on reaching a mutual agreement on price and terms.
Feeling confused yet? You’re not alone. These new rules are the most complex we’ve encountered in our industry. However, I believe that with common sense and a commitment to professionalism, we can continue to serve our clients effectively. Over the years, it’s been rare for buyers to pay compensation directly to their agent; typically, the sales price has included enough to cover both the listing and buyer’s fees. But consider this—how many first-time homebuyers can afford to pay a down payment and cover their agent’s compensation out of pocket? Very few, right?
So, my final thoughts are this: Let’s continue to rely on the methods that have served us well for years while applying common sense and maintaining professional standards to navigate these new rules. Professional, well-informed realtors earn their compensation by securing the best outcomes for their clients, whether they’re buying or selling. A successful transaction leaves both parties feeling well-represented. Two key elements to making this work are negotiation and compensation. Remember, compensation (formerly known as commissions) has always been negotiable and never set by any broker. It’s something that every professional, including realtors, earns through diligent and effective work.
At Corcoran Ferester Realty, we ensure that our agents are well-trained and uphold the highest standards of professionalism in serving our clients.
Beth Ferester