As you may or may not have heard, the world of real estate has changed as a result of the NAR class action lawsuit settlement in Missouri earlier this year. As of one week ago, our local Real Estate Boards and MLS’s (multiple listing service) officially adopted the changes that rolled out across the country on August 17th. Aside from a mountain of new paperwork, there has been a lot of swirl about what this all means for the future of the industry and much, much more. In an effort to not add to the noise, my hope in this article is to share what has and what hasn’t changed. Here we go. 

I want to start with the caveat that we are in the very early days of this roll out. We are working through all of this in real time and we won’t know what the short or long term implications will be for at least a few weeks if not a few months. Buyers and Sellers who are in the market right now are on the front lines of this change and are wading through it with us. Change is never easy – that’s human nature. But change often presents great opportunities and an evolution in service. So, what changed? At a high level, two things:

1. Buyers who work with a professional buyers agent must sign a contract with that agent prior to any services being performed. Yes, this includes opening a door and showing a house. If you ventured into an open house last weekend, you may have been asked to sign in on a new form issued by the California Association of Realtors. That’s related to this. 
2. The advertisement of cooperative compensation (buyer agent fee) in the MLS is no longer permitted. Instead, an MLS can only disclosethat a seller is willing to offer a “concession” to the buyer, which the buyer may use however they want, including to pay  their agent. 

These may not seem like big changes in the overall picture of buying and selling real estate, but these changes are significant. Previously, a seller and their listing agent would strategically decide the compensation to offer to a buyer’s agent. Upon sale of the home, the seller would pay a larger commission to the listing agent, of which a portion would be passed onto the buyer’s agent as compensation. This was referred to as a co-op commission. That flow will no longer happen with this change.  Instead, a buyer and their agent will work out the services that they want and the correct compensation for those fees ahead of writing an offer. Then they can ask for the seller to cover some or all of that compensation in the terms of the offer. The most succinct way I have heard it described is that listing agents and sellers are no longer pre- negotiating the fee for a buyer’s agent.  Might that end up in the same place we were in before? Maybe. Might it turn the entire compensation model on its head? Also maybe. It’s simply too early to know. 

It’s always easy to vilify change. It’s human nature to like the status quo. I’m not ready to put out a blanket opinion on whether these changes are good or bad for the industry. While disruption causes chaos no matter what, I do believe there will be some positive changes to the industry that come out of this new environment we are entering, like: 

• Increased transparency between buyer agents and their clients regarding the services that are rendered and the fees that are paid;
• the reexamining of business models for both the agents and brokerages; and,
• an evolution in the skill set and value delivery required to be successful.

So, that’s what’s different. What remains the same? 

1. Real Estate Commissions have been and remain negotiable. There are, and likely will still be norms, but it’s always negotiable. 
2. Agents should be paid for the value they provide – this includes deep, hyperlocal knowledge of neighborhoods, amenities, what drives value in a home, competition, negotiation, strategically positioning an offer, and limiting a Buyer’s liability, to name a few. 
3. Aligning yourself with an experienced agent (or team of agents) who provide this value gives you a significant advantage in this marketplace
4. Real estate transactions are, at their core, about Buyers and Sellers. Agents are there to make the process faster, safer and smoother than they would otherwise be.  

My take: every market around the country will find its footing and new normal over the next 60 -180 days. Best practices will emerge, new forms will be created and the world will keep spinning – like it did during the COVID pandemic. I suspect we will see all manner of new business models emerge, compensation structures tested and value propositions proposed. Some will fail and others will emerge as new and innovative ways of doing business and providing value to clients. In the long run, buyers of real estate will still want to transact with the sellers of real estate. And as long as there is a gap to be bridged, an ethical, knowledgeable and professional agent will find a way to bring value to those parties.