Real Estate News: Myth Busters – No More Commissions? FALSE.
By Tracey Barrett, Associate Broker
July 1, 2024

July 1, 2024 has come and gone and we are rapidly approaching the August 14, 2024 enactment date for the deadlines for the required actions of the National Association of Realtors settlement. News outlets have been announcing that real estate commissions are going away. This is simply click bait and untrue.

What’s happening?
For years in the real estate industry a listing agent would collect a total commission negotiated with the Seller, then, at the Seller’s direction, offer a portion of that sum to cooperating brokers as a commission incentive to bring a qualified, ready, willing and able buyer to purchaser the property.

For many it looked like this:
– Seller pays Listing Broker 6% of the total sales price to sell the house.
– Listing Broker offers half of the commission, 3% of the total sales price, as a unilateral offer to cooperate with other brokers.
– This commission and sub-commission were paid by the proceeds of the Buyer’s offer as a pass-through and reduction to the Seller’s net proceeds.

The Issue
For years this offer to cooperate was a required field in the REALTOR® association multiple listing services (MLSs) and it was successfully argued in a class action law-suit that it was causing price fixing and was inherently anti-trust.

The Other Issue: Written Buyer-Broker Agreements
This is, or at least should be, less of an issue in the Commonwealth of Virginia which has required written Buyer-Broker Agency since 2012. This Agreement, as it should have done in the past, clearly defines what the negotiated Buyer-Broker Agency fee is that the Buyer is responsible for paying.

So now what?! True negotiation.

Starting August 14, 2024 all offers of cooperation to a Buyer’s Broker will be prohibited to be advertised in the MLS. This means that any websites that receive syndications from the MLS, such as Zillow and Realtor.com, will not have this information published. There is a clean slate.

Will commissions for a Buyer Broker go away? No.
(Unless you can find a REALTOR® that will work for free – and you better get that in writing.)
Broker to Broker offers to cooperate are not illegal.
Seller paid Buyer Broker Commission is not illegal.
Buyer paid Buyer Broker Commission is not illegal.

From August 14, 2024 (and actually since forever) forward Buyers should have a clear understanding that they are responsible for paying their Broker compensation. This may be paid directly by the buyer to the broker or negotiated at the time of contract offering as a Seller paid concession directly to the Buyer Brokerage or as a closing cost subsidy to the Buyer.

These new changes will test the skill of the Agents involved in the transaction to carefully explain and negotiate their compensation arrangements with their clients, as well as, should Seller assistance be needed, negotiate the terms of an offer to include some or all commission compensation and/or credits. In the end, Buyers will need to have a clear understanding of their total finances when purchasing a home. They will likely need funds for their downpayment, closing costs, and buyer agent. Additionally, Sellers should understand that buyers may ask for concessions to ease the financial burden of the home purchase (before they could finance the commissions through their mortgage and Broker to Broker offer to cooperate, now they may have to come out of pocket with cash), and therefore a Seller should consider the best net proceeds and other contractual terms when considering an offer.

Please see the article below for more information and as always, contact the FOCUS on NoVA Real Estate Team today for a one-to-one consultation.