It appears that the settlement should be approved by or on August 17, 2024, and we expect the requirements of the settlement to become effective in the fourth quarter of 2024. But let’s first examine here the impacts of the settlement on the selling side of the transaction. The side of the transaction with the most upside on the requirements coming out of the settlement is of course the sellers. Keep in mind it was the sellers bringing the claim. Sellers will now have as they always have, the potential to negotiate the commission with their agent at the time of the listing agreement. They will now decide whether they will offer any compensation to the buyer’s agent producing a buyer and if so, how much. They will work closely with their agent in assessing current market conditions locally as well as within their community. This will potentially result in savings to the seller.
I do expect and am already seeing many sellers experimenting with compensation to an agent working with a buyer. Generally, I am still seeing sellers view of compensation as that of an incentive to attract buyers. I think in any market, sellers will see the advantage of providing continued incentives to buyers in the form of compensation for their agent, paying points to reduce the interest rate on a buyer’s loan, paying for temporary buydowns of the interest rates on buyer’s loans (which we have experienced quite a bit of in the last year), the offer of vehicles (as we saw in the last buyer’s market), and the offers of pre-paid HOA dues, etc. Sellers will continue to exercise creative options to attract just the right buyer with the assistance of their agent.
From the previous blog, one of the requirements is sellers can no longer advertise offered compensation in the MLS. This will effectively put all sellers on a “level” playing field since compensation differences will not be on the MLS. It is important to note the settlement does not forbid the advertisement of compensation through other channels, just not in the MLS. The seller’s agents could still market the compensation through printed brochures at the property, social media posts, etc. This does not negate the need for this information, and we are already anticipating interested buyers in a seller’s home will ask what, if any, compensation is being offered by the seller. This will all become more solid in the coming months.
The seller’s agent and the value they bring to the transaction is not expected to change and will continue to provide invaluable assistance. There could be a period of adjustment which we expect as buyers and sellers adjust to this new normal. I would initially see for sellers the possibility buyers will attempt to negotiate some or all the compensation for their agent through the mechanisms of an offer in cases where the seller does not offer compensation. Through this scenario there would be no fall in housing prices as some are predicting because these requests will ultimately be driven by market supply and demand as it always has.
Another scenario for sellers is the possibility of working with buyers not choosing representation. This could play havoc on the transaction as the buyer is not familiar with negotiation, transaction management, contract preparation, and implications of breach or default of the contract. Sellers will be well advised by their agents of the pitfalls associated with these scenarios.
Overall, the process of seller representation in the real estate transaction should see little change. What changes is the compensation to a buyer’s agent (if even offered) and if offered how that can be advertised.
We will look next at how this impacts buyers.
Realtors are still your best asset for protecting and preserving your real estate and the generated wealth creation coming from your home.
