The Best News For Real Estate Agents In Decades

Following the NAR settlement (which is pending approval by the DOJ), there have been many headlines with doom and gloom for real estate agents and even some stating that buyer agent commission is going to disappear over time.

I want to "steel man" these headline articles, as I certainly don't interpret the outcome of the potential settlement the same way as the mainstream media. Of course, no one knows what the landscape will look like exactly in 6-12 months from now, but we have some hunches. 

Here's some positives we expect to observe from the settlement, should it be approved. 

Agents will now have guaranteed compensation. 

Since agents will be required to have their buyers sign a representation ("rep") agreement (for example, agreeing to pay an agreed upon commission percentage for a certain number of months, in a specific geographical area if the buyer transacts) before providing services to them, it guarantees their commission is paid by either the buyer or the seller.

This is good news as there are currently no guarantees of compensation for buyer agents outside of the rep agreement. It's unlikely a buyer will go directly to the seller to buy a property, as Buyers typically hire their own independent agent. In this regard, nothing has really changed. Top buyer agents are worth their weight in gold, especially in the market we are entering - a buyer's market. 

Agents will save more time & experience less ghosting. 

Likewise, a good portion of buyers work with multiple agents to view properties. They jump around from agent to agent, sometimes working with up to 2-4 agents at a time. This is because most agents don't do consultations to teach them how the process works. The agent simply goes out, shows homes and hopes to get lucky that a Buyer continues with them, and a transaction occurs - most operating on hope and faith.

With a buyer rep agreement, this luck factor will disappear as the buyer won't want to have to pay multiple agents commission via buyer rep agreements to search for properties. Secondly, most unmotivated people will be deterred from signing a representation agreement upfront and it will instantly weed out less motivated people who just want to browse homes.

Another outcome we see is that some buyers try to get agents to do work for them and then cut them out of the deal at the last minute to go with the seller directly. This new buyer representation agreement will give the buyer agent recourse against a buyer if they choose to do that. 

If you look closely, this new requirement for buyer rep agreements gives more protection to buyer agents and their commissions, and less protection for buyers to have a choice of agent, as they'll potentially get "stuck" with the agent they sign a buyer rep with. 

Overall, I expect a lot of small claims lawsuits over these new representation agreements which will hammer out how "guaranteed" the buyer agent commission actually is. It will depend on the language in the rep agreements that the MLS requires and perhaps agents will add additional language to beef up the agreements to protect their commission even more. 

New closed commission system to the public. 

Since the pending settlement includes the inability of agents to put buyer compensation offerings in the Multiple Listing Service (MLS), there will be a separate medium of exchange (website, phone, auto responders, etc.) that is off-MLS that the public won't be able to access. This requirement reduces transparency of available commissions to the public/consumers. It makes it a closed system again for real estate agents' commissions. 

Currently, buyer agent commissions are posted everywhere publicly, including Zillow, and this won't be allowed since the commission will be taken out of MLS, which is where Zillow gets its data from. Under this change, the buyer agent would inform their buyers if the seller were offering a commission (and how much) or not, and whether or not the buyer will have to cover the gap between their agreed-upon commission rate in the rep agreement and what the seller is offering.  

Again, either way, the buyer agent is getting paid for the work they do, and this compensation, like all compensation for salespeople for any product, is factored into the price of the product (property) either through seller concessions or a commission. 

Certainly with this settlement, real estate sales will become less about luck and more about skill. This is a good thing for the industry at large, but I don't think it will impact commissions for agents who know their value and can convey it in the relationship with buyers. In fact, more commission will flow up to the agents who can show their value and those agents who can't, will drop out. 

We have been doing and teaching buyer consultations and buyer loyalty agreements for the last 8 years - it's been a wonderful boom to our business. We have higher conversion rates, lower fall through rates, and less ghosting, all impacting our psychology and energy levels as budding entrepreneurs. Wins matter. 

Requiring agents to be more professional and prove their worth is a good thing. 

I suspect over time, buyers will become more picky of the agent they choose to work with, due to the rep agreements, and more business will flow up to the highest quality agents and less so to the "jump in the car and go" agents who wing it, which is unfortunately the current norm. 

If you're looking to connect or join with a brokerage that already specializes in these type agreements, feel free to reach out.

Jon Brooks / jon@movewithmomentum.com