By RYAN MAUPIN
REALTOR®
The Maupin Group at RE/MAX First
Greetings, Los Alamos!
I wanted to get the word out to our community that we’re about to enter a new era of real estate and to help you prepare for some big changes on the horizon.
Beginning July 10, 2024, our local Santa Fe Association of REALTORS® (SFAR) will begin complying with the terms of the recent National Association of REALTORS® (NAR) class-action lawsuit settlement (“The Settlement”). NAR has required all local associations who opted into The Settlement to be in full compliance prior to NAR’s final implementation date of Aug. 17, 2024, so we will be a little bit ahead of other associations.
The Settlement requires a change in how commissions to brokers representing buyers (“Buyer’s Brokers”) will be paid. And, more generally, The Settlement will change how Buyer’s Brokers are allowed to interact with buyers.
Background
Up until now, brokers representing sellers (“Listing Brokers”) would enter into Listing Agreements with sellers that included both the Listing Broker’s commission AND an optional commission to be paid to the Buyer’s Broker. Listing Brokers would then publish the Buyer’s Broker commission in the Multiple Listing Service (MLS), and that formed a contract between the Listing Broker and the Buyer’s Broker for the payment to be made at closing to the Buyer’s Broker.
Under this system, the seller paid commissions for both the Listing Broker and the Buyer’s Broker. This system allowed all prospective buyers to be represented by real estate professionals during a transaction without having to directly compensate them, as compensation was indirectly paid through the sales price to the seller. This helped maximize the number of buyers that could transact on a property, as certain loan types would not allow Buyer’s Broker commissions to be wrapped into the loan. Similarly, it helped reduce the amount of money a buyer needed to close a transaction when financing a home.
Over the past few years, multiple lawsuits emerged alleging that this practice was not fair to sellers, and that it also prevented free market negotiations of commissions between buyers and Buyer’s Brokers, thus artificially inflating real estate commissions. In The Settlement, NAR agreed to make several changes to address these concerns. These are the changes that are about to go into effect.
Changes
The most significant change is that NAR is now prohibiting Buyer’s Brokers from showing properties, or providing any other services, unless they have a Buyer’s Broker Agreement in place with that buyer. The Buyer’s Broker Agreement will include the commission negotiated between a buyer and a Buyer’s Broker that will be paid to the Buyer’s Broker in return for their service. This will make entering the real estate market as a buyer almost identical to entering the real estate market as a seller: you must first have an agreement in place with your broker.
Another change will affect open houses. Listing Brokers will be allowed to hold a seller’s house open to the public, but they will NOT be allowed to have conversations with a prospective buyer about purchasing the property, unless they already have a Buyer’s Broker Agreement in place with that buyer.
Additionally, the MLS will no longer allow Listing Brokers to include a Buyer’s Broker commission to be published as part of a listing. Instead, there will be a “Seller Concession” field. These Seller Concessions can be used by the buyer to cover any buyer-related costs as specified by the Buyer. These could include title company closing costs, lender fees, mortgage loan interest rate buy-downs, or other costs.
Next Steps
If you are interested in purchasing real estate in the near future, I strongly recommend reaching out to your real estate broker about getting a Buyer’s Broker Agreement in place sooner rather than later. This will help ensure that you will be able to immediately schedule showings when you see a property you love.
If you do not have a current real estate broker, now is a great time to research real estate brokers in the community and find a good fit for you. Otherwise, if you call a broker to schedule a showing on a property, please expect to be politely told “no” until a Buyer’s Broker Agreement is in place.
If you are interested in selling your property in the near future, I’d also encourage you to have a conversation with your real estate broker about how these changes may affect your Listing Agreement, and also to discuss their recommendations on Seller Concessions.
For me, Seller Concessions will always be property-specific and an important part of the marketing mix, much like the listing price. In my opinion, there shouldn’t be a one-size-fits-all Seller Concession for every property. However, I do believe that making Seller Concessions will be an important part of maximizing the exposure of your listing to as broad a group of buyers as possible.
Conclusion
Like all significant changes, it will take some time for everyone (including those of us in the industry) to adjust. I look forward to continue serving our wonderful community, and I look forward to continue providing you with the high-quality experience you have come to expect from me and my group. If you have any questions, please contact me directly (505.412.3125) or through RE/MAX First (505.662.6789).