We are heading into a whirlwind of new rules, new forms and new processes. Let's break down the who, what, where, when, and why.
WHAT/WHY: There was a lawsuit filed against the National Association of Realtors that stated real estate commissions were price-fixed and the sellers were unaware they were offering a commission to a buyer's agent.
TRUTH: Real Estate Commissions are always and have always been negotiable. However, West Michigan uses forms that show transparency in the total commission and how it's split. The lines are fillable, which avoids price-fixing. The seller decides how-much they would like to pay the listing agent and how much they would like the listing agent to give of that amount to reward a buyer's agent with bring a buyer. The seller does not pay the buyer's agent. If there is not a buyer's agent, in most cases the total amount of commission offered goes to the listing agent.
MY TAKE: Yes, fees are negotiable, but mine are set at 6% because of the extra services I provide, such as hands-on prep with cleaning, painting, decluttering, and staging; professional photography with marketing package and continued social media marketing throughout the active stage of listing, multiple open houses, if needed, extensive market research before and weekly during the active stage of listing, experience in contracts and resources to assist any hiccups during the negotiation phase to closing. There may be sellers that don't want to pay for my expertise and knowledge I've gained through my pre-law degree and legal experience, interior design degree and staging certification, as well as classes on negotiation and fair housing. They may not be interested in my statistical research or need help packing, painting or cleaning. I'm not hurt if they don't want to pay the 6% because I'm not the agent for them. However, my fee will stay at 6% and I will make allowances within my fee to offer a portion to a buyers broker still. I believe it's important in helping market your home to as many buyers as possible and help home buyers with the initial cost of purchase.
WHO: Who does this affect? Mainly buyers and their agents. In the early 1990's another class action suit brought to light the need for a buyer's agency agreement. It was discovered that buyer's were not being told what their legal rights were while buying nor were things getting disclosed to them. The listing agent handled the transaction, even though they were working on behalf of the seller. Buyer's agency laws were put in place to protect home buyers. Most MLS required some sort of cooperating fee be offered for brokers that brought a buyer to the table. Now, that is going away two-fold. There is no longer a requirement for the seller's agent to offer a cooperating fee and we are no longer allowed to advertise if the sellers are willing to offer a cooperating commission.
TRUTH: This is going to create more lawsuits for lack of transparency, anti-trust violations, and so much more time and paperwork for everyone. While there are no hacks or loopholes to be had, I plan to be
straight-forward with my clients, letting buyers know their options, and putting in the legwork to make sure they are fully represented. There is a greater chance that a buyer will need to bring some money to the closing table to pay for my services and I want to make sure they know without a shadow of a doubt, I continued to work just as hard for them as I did before all the changes.
MY TAKE: While those who feel we 'make too much' (because they have not sat down to see how much we actually bring home after our expenses), they will sneer and say it's about time you work for your money. I know I'm not the average agent with the amount of time and energy I pour into my clients. It is already a hard market for buyers who are facing higher interest rates, higher home prices, higher property taxes and now they need prepare to pay a commission to an agent if they want fair representation? Not to mention, some lending programs have a cap on how much assistance they can ask from the seller. These new rules will 1) limit buyer pools causing sellers to get less competition and have home sitting on the market longer and 2) create a burden for home buyers who will need to choose between having a knowledgeable agent help them with the process or asking for help with closing costs (if they even realize that's an option without an agent educating them on that). Bottom line - it is still important for buyers to have someone helping them navigate all their options and submit the best offer, but will they choose get the help when the burden might fall on them?
WHERE: While this class-action suit was brought nationally, not everyone fell into the lack-of-transparency category. But because we are all apart of the association, we all bear the burden of following the new rules. You will notice on our MLS that there will no longer be a field for compensation offerings. Also, it will no longer be called commissions. If any funds are offered by the seller, it will need to be disclosed off of the MLS and it will be listed as 'concessions' and the seller cannot dictate what it goes for. The buyer can choose to use it for their broker fees, closing costs, pre-paids (like inspections) or to buy down their interest rate.
TRUTH: The listing documents still have a fillable section for the negotiated fees and if the seller would like any portion of that to go towards buyer concessions. However, there is another box that states whether to check 'yes' or 'no' for concessions offered on the MLS.
MY TAKE: How this gets us away from what the lawsuit was trying to accomplish is beyond me. I will be advising the sellers to check 'no' on the listing agreement while still encouraging them to set something aside from my commission amount to give to the buyers. I don't want buyers agents to know how much we are or are not offering, but rather review offers with the amounts needed written in so that I can create an appropriate and accurate net sheet for my sellers to review. If my seller's agree with that, I will add a comment that all offers, including those with concession requests are encouraged.
WHEN: All these rules will kick in for our area August 17. We are hustling to make sure we have contracts, documents, and disclosures updated. We are currently working through our listings and amending forms. We are going back and auditing our buyer agreements to keep them up-to-date and amending our listings to have sellers agree to remove the commission sections.
TRUTH: While we are implementing all these rules, the judge has yet to actually approve this settlement proposal. If it is not approved or amendments are made to the proposal, we may see more changes come into play.
MY TAKE: I really hope the DOJ is taking a close look at how we actually help buyers, how this move takes away the ability to buy from the most vulnerable. These rules do not create an even playing field and instead of setting the stage for transparency, it creates the opportunity for backdoor handshakes, non-ethical behaviors and anti-trust violations.
While I'm going to roll with the punches, I will do so knowing my low-income buyers will get the short end of the stick. I already sense their frustration in competing with corporations and multiple-residential owners building a portfolio with cash sales. I can't imagine how much more difficult it will be when they are competing against cash buyers who don't care about representation on a place they'll just turn to a rental and my primary home buyer still needs to write in a concession value for help.
Change is inevitable, but I'm positive I will find a way to create winning opportunities for those who choose me. 