The news media has characteristically portrayed the National Association of Realtors settlement of the Stitzer-Burnett lawsuit in a typically sensational, non-factual manor. The settlement is complicated in some ways and very straight forward in other ways. Compensation negotiation is not new or revolutionary. Commission or Compensation? Same animal, different name. The compensation to the Buyer Broker will now be a contractual agreement beginning with the Buyer and his or her Broker/Agent. The Listing Broker/Agent will not ask for or receive any Buyer Broker/Agent compensation to give to the Buyer Broker/Agent anymore. But that is just the beginning.
These are the major contractual differences and associated document changes required by all MLS member Brokers in the whole of the United States, effective August 15, 2024:
- Exclusive Buyer Representation Agreement
The Buyer and Buyer’s Broker* must complete and sign the new ‘Exclusive Buyer Representation Agreement’ before the Broker can show any home or property to the Buyer either in person or virtually. THE ONLY EXCEPTIONS: Buyer goes into an open house or the Broker is showing a potential Buyer their own listing.
There has been a Buyer Broker Agreement documents in use for many years. Most Brokers have not chosen to utilize it. Effective August 15, 2024, the new document is a requirement.
Within this Representation agreement, the Broker and Buyer agree upon the compensation that the Broker will be paid for his or her services to the Buyer. This compensation agreement is between the Buyer and the Broker regardless of what a Seller is or is not offering as a cooperative compensation. If a Seller is not offering a whole or a part of the compensation as stated in the Exclusive Buyer Representation Agreement, the Buyer will be responsible for all or the difference of what the seller is offering. The Buyer can choose to negotiate with the Seller during the offer regarding closing costs, concessions, credits, etc.
- The Exclusive Right to Sell Agreement
Has been updated to reflect the new rules regarding cooperative compensation to a Buyer Broker. The biggest wording change is that it will no longer state that the Listing Broker will pay a flat amount or a percentage of the purchase price to the Selling (Buyer) Broker. The Listing Broker will not be paying any cooperative compensation to the Buyer Broker. That is now something the Seller may offer or pay. The new wording will state that the Seller either agrees to offer cooperating compensation or does not agree to offer cooperating compensation to the Buyer Broker. Please note the difference between’ offer’ and ‘pay.’ The Seller may ‘offer’ to pay but that is not a contractual obligation to the Buyer Broker as it stands in this agreement. Negotiations may occur further in the buying process. Addendums are great tools. - Residential Offer and Acceptance
Compensation language has been changed to ‘Seller will compensate Buyer’s Broker % of the Purchase price or $xx, at Close of Escrow paid to (buyers) Brokerage.’ Previously written as Seller has agreed by separate listing agreement, to pay real estate commission for serviced rendered, at COE as publish in the MLS..” Cooperative compensation cannot be displayed in any MLS or MLS feed. Realtors and Buyers may contact listing agents to ascertain if there is cooperative compensation be being offered by the Seller
Contracts are negotiable until finalized, whether they are an Exclusive Buyer Representation Agreement, an Offer or an Exclusive Right to Sell Agreement. This is and has always been the case with regard to MLS contracts, and most contractual agreements in general. Changes can be made if both parties agree in writing.
*The word ‘Broker’ in this article refers to both Broker and Sales Agent.