The New Rules of Real Estate
The History
Before the MLS and Buyer representation
o Agents only showed their own inventory of listings
o Buyers had to work with several listing agents, all of whom were working or the Seller
o Similar to buying a car now
o Firms shared listing information
o Firms agreed to pay a buyer’s agent’s firm a portion of the fee they were earning from the
o Best interest of Buyers and Sellers
• Buyers get to see all the listings
• Sellers get to market to the entire pool of
o But agents were mostly still working for the Sellers
Then came Buyer representation
o Buyers work with one agent, who has a fiduciary responsibility to the Buyer
o These new Buyer Agents still received compensation from the listing firm, even though they were working for the Seller
o In Virginia, Buyer Agency Agreement became required by law in 2012.
• Upon “substantive discussions” between the Buyer and the agent.
The Lawsuit
The Accusations
o NAR and/or MLS systems required the Listing firm to make an offer of compensation to the firm representing the Buyer.
o Commissions were “fixed” at 6% by the National Association of Realtors and/or local MLS systems
o This caused Sellers to overpay for real estate services, the plaintiffs allege, because Sellers were told they “had to” pay the listing firm enough to enable them to share with another firm if necessary.
The Verdict and Award
o NAR and some large national franchises were found guilty o Jury awarded $1.8 billion
The Settlement
o NAR agreed to a $418 million settlement which included practice changes.
o Large franchises made their own settlements
o Large companies (greater than $2 Billion in sales volume) were left out of the settlement and had to make their own deals with the plaintiff’s attorneys.
o Practice changes took effect on August 17, 2024
Practice Changes
Agents
o Cooperating fee offered by the Listing firm to Buyer agents removed from MLS
o No mention of commission allowed in MLS
o Attempt to end “steering”
o Listing firm may still offer a cooperating fee to the Buyer’s agent’s firm
o Seller may pay the Buyer agent fee directly or through concessions to the Buyer
o Buyer agency agreement required whenever working for the Buyer
o All forms must make clear Professional Services fee is not fixed by law, NAR, or the MLS.
Buyers
o Now required to sign an agency agreement with an agent before being shown a house.
o Does not apply to Open Houses
o The agreement can be for specific houses or can be long-term.
o The agreement describes how compensation will be handled,
o Professional Services fee
o Part of Buyer’s closing costs
o Offset by any cooperating fee offered by the Listing firm
o If no offer from the Listing firm, the Seller can negotiate a concession within the sales contract.
o Buyer uses that credit to pay their agent
o Meet your agent at their office, in a professional setting, to begin.
o Discuss the new rules and how your agent’s firm is applying them.
Practice Changes
Sellers
o A cooperating fee has always been a part of our Listing Agreement and has c been very clear about cooperating commission being offered.
o The Listing firm’s fee is the same regardless of the involvement or lack of involvement of other agents or firms in the transaction.
o Each firm may set their own fee (like any other business)
o The listing agreement says…”KMR will make our best efforts to sell your house, We will share all information about your house with other firms in our MLS, and if one of those firms sells your home before we do we will share part of what we have earned with the other firm.”
o This is in the best interest of the Seller and the Buyer
o Some firms have now adopted a policy of not offering cooperating compensation, nor accepting cooperating compensation from another firm.
o Buyers making an offer on one of these listings will need to include their agent’s fee in the Buyer’s costs at closing or will ask the Seller for a concession to cover some or all of the fee at closing.
o Seller ends up paying the same amount, but concessions in the contract may cause appraisal issues.
o Seller may be asked to reduce price after agreeing to concession.
o We do not think this strategy is in the best interest of the Seller.
o Be sure to talk with your agent about all of these issues before entering the market!
Karl Waizecker, Principal Broker 1962 Evelyn Byrd Avenue, Harrisonburg, VA