In recent news, you may have heard about significant legal developments within the real estate industry. Last year, several class action lawsuits were brought to trial and were ultimately settled by the National Association of Realtors. These lawsuits were primarily focused on the issue of transparency, particularly in the states where they originated.
One of the key points of contention was the inconsistency in how Buyer Representation forms were handled across different states. For example, in Maryland, there have been clear forms that detail how Buyer Brokers are compensated, providing transparency to all parties involved. However, this clarity was not present in many other states.
To address these discrepancies and ensure a uniform approach across the country, new regulations are being introduced on a federal level, effective August 17. These changes are designed to bring consistency and clarity to both Buyers and Sellers regarding that commissions are negotiable, how commissions are paid.
Here’s a summary of the new rules:
· Buyer Representation Agreement: Starting August 17 (or August 14 in Maryland), Buyer’s Agents must have a written Representation and Compensation Agreement with their clients before showing homes. This is now a requirement across all 50 states.
· Clarification of Duties: The Buyer’s Representation Agreement will clearly outline the duties and responsibilities of the agent to the buyer, including how the agent is compensated.
· Changes to Seller’s Compensation Offers: Sellers can no longer make offers of compensation to Buyer’s Brokers through the MLS. However, they can still legally offer compensation to the Buyer’s Broker, but it must be communicated through other means like written addendums or marketing materials.
· Negotiable Commissions: Commissions are, and have always been negotiable. Buyer’s Brokers can be compensated in various ways, whether by the Listing Brokerage, the seller, through negotiation in the offer, or directly by the buyer.
If you have questions about how these changes might affect your role as a buyer or seller, you’re encouraged to reach out to your Benson & Mangold real estate professional for clarification.