Changes to Buyer Agent Compensation

The recent National Association of Realtors (NAR) settlement has brought significant changes to how real estate agents who represent buyers are compensated. Here are several key points to keep in mind:

Removal of Commission Offers on MLS: In most states, the settlement prohibits listing agents and sellers from displaying offers of compensation to buyer agents on the MLS. This aims to increase transparency and reduce conflicts of interest. MLSs can no longer require these offers for participation​. However, the Northwest Multiple Listing Service (NWMLS) did not opt-in to the NAR settlement agreement and will continue to publish offers of compensation on the NWMLS.

Requirement for Written Agreements: Agents must now enter into a written agreement with buyers before rendering real estate broker services, such as touring homes. These agreements outline the agent’s role and compensation, ensuring clarity for both parties​. The NWMLS calls these Buyer Brokerage Service Agreements (BBSA) and requires these to be signed as early in the process as reasonably possible.  These agreements have been updated as of 8/15/24 with more clear and concise language regarding Buyer Broker compensation (see below).

Negotiability of Commissions: Agents are required to clearly communicate that ALL commissions are fully negotiable. This must be explicitly stated in written agreements, helping to ensure that buyers and sellers are aware that these fees are not fixed.

Buyer Agent Compensation Post-NAR Settlement. Following the NAR settlement, buyer agents have 3 primary ways to be compensated:

1. Seller Pays Buyer Agent Directly.  The seller may continue to offer compensation directly to a buyers agent. The seller’s offer of compensation is stated in their Listing Agreement as well as on the Purchase and Sale Agreement when a buyer makes an offer to purchase the house.
2. Negotiated Commission from the Seller: Buyer agents can still negotiate with sellers for compensation. A buyer may request the seller to pay buyer agent’s compensation as part of buyer’s offer. Buyers will be obligated to pay their agent any amount of compensation not paid by the seller. If seller’s offer of compensation is greater than the agreed upon compensation between buyer and buyer’s agent, a buyer may request that the additional amount be credited to the buyer (to the extent allowed by Buyer’s lender)​.
3. A Combination of Buyer and Seller Payments: In some cases, the buyer’s agent might receive part of their compensation from the buyer and part from the seller. This hybrid model allows for flexibility depending on the specifics of the transaction and the negotiation between all parties involved​.

These new compensation structures reflect a shift towards greater transparency and flexibility in real estate transactions, empowering both buyers and agents to negotiate terms that best suit their needs.

Compensation Disclosure: The settlement mandates that agents disclose their compensation in a written agreement. The disclosure must be specific, avoiding vague language about potential compensation sources​.

Ban on Filtering Listings by Commission: Agents are not allowed to filter or restrict listings based on the offered commission. This change is intended to ensure that all listings receive equal consideration, regardless of the compensation offered​.

These changes are designed to promote greater transparency and fairness in real estate transactions, affecting how agents interact with both buyers and sellers.  To read more about this settlement and how the NWMLS has implemented these changes, click here.

Source: (StreetEasy)​ (RealEstateNews.com) (McKissock Learning)​ (NWMLS)