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Quick Guide to the Upcoming August 17th Commission Rules Changes

A Comprehensive List of Resources and Links for Agents

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BrokerBuzz
August 14, 2024

As of August 17th, the real estate industry will undergo significant shifts due to the NAR settlement. Below is a concise overview of the key changes and what agents need to know. This list of bullet points and resources will help guide you through the transition. Please note that this is a dynamic process, and further changes and updates may occur as the industry adapts.

Key Points to Know:

  • August 17th Changes: The traditional Cooperative Compensation model—where the listing agent takes the full transaction commission from the seller up front and then splits it with the buyer’s agent at time of closing—is ending.

  • Offers of Compensation: Offers of compensation are no longer allowed to be displayed in the MLS or on agent websites.

  • Buyer Agent Responsibility: Buyer agents must now negotiate their success fees—whether a commission percentage or a set dollar amount (but cannot be open-ended like "whatever the list-side is offering")—directly with clients. A written agreement with these terms must be secured before showing homes or at least prior engaging in any revenue-generating activities (for example: strategizing, offering, negotiating).

  • Negotiating Success Fees: Buyer agents can negotiate with sellers to have the buyer's success fees—fully or partially—covered by the seller’s proceeds. These terms should be included in the offer and must be approved by the buyer.

  • Listing Agent Role: Listing agents will negotiate their fees with sellers upfront, with no obligation to share commissions with the buyer’s agent. However, it's advisable to set sellers’ expectations that offers may include requests for the seller to cover, fully or partially, the buyer agent’s commission.

  • Avoiding Direct Compensation: Listing agents should avoid offering direct compensation to buyer agents from their commission. While not explicitly banned by the commission settlement, agent-to-agent (or technically brokerage-to-brokerage) compensation is increasingly frowned upon and, in some cases, already banned by brokerages and MLSs.

  • Transparency and Negotiability of Success Fees: Success fees on both the buy and sell sides are fully negotiable. Agents must clearly communicate these terms to clients, ensuring they understand the new commission structures. With increased scrutiny from regulators and industry watchdogs, transparency is essential for managing expectations and avoiding potential liability.

  • Updated Contracts and Forms: The new commission structure changes require updated contracts and forms that reflect these settlement changes. Agents should absolutely be experts on these new contracts and forms, understanding them thoroughly to ensure compliance and minimize liability, and effectively guide their clients through these changes.