Are you confused about all the hubub around the NAR class-action lawsuit and settlement? The rules have certainly changed, but there’s no need for anxiety as long as you know how the process works.
The lawsuit was basically about competitiveness in the real estate market…the plaintiffs, among other things, claimed that collusion existed between real estate agents and agencies, forming a sort of “defacto” standard that the Seller would always pay 3% to the Buyer’s agent and that in reality it wasn’t negotiable. While we’ve always maintained that everything is negotiable, the court found in favor of the plaintiffs, and NAR has been working with the various state and local level organizations to form new rules and forms to support those rules.
One of the major changes is that the Buyer Agent Commission (“BAC”) is no longer allowed to be posted in an MLS listing. This means that Buyer agents must contact the Seller or Seller’s agent and inquire if the Seller is offering to pay the Buyer agent commission, and if so, how much. Buyers that wish to retain the services of a Buyer’s agent must now sign a document called the TRX 1507 Short Form or the TRX 1501 Long Form stating who will pay commissions and how much before any properties are visited. The form stipulates the Broker’s fees and who will pay this amount; it’s usually in the form of a percentage, but can be a flat fee. The form also states that Broker can recieve this compensation from Seller, but if Seller doesn’t offer or agree to pay it, the Buyer is on the hook for the whole amount. This will be a little tricky in cases where an anxious Buyer is scraping together a down payment and closing costs that can add up to a five- or six-figure amount. This is where communication is key….if everyone understands and agrees up front who owes who what, where it’s coming from, and what happens in different circumstances, the transaction will go smoothly. The TRX 1507 form will facilitate this conversation and allow the Buyer’s Agent/Broker to have the discussion with both the Buyer and the Seller’s Agent.
This is particularly sensitive when a Buyer does not know the Broker well, as with a referral from a friend or former client. In this case, it’s essential for the Broker to thoroughly explain the process and the new rules, and therefore give the Buyer a comfort level that the Broker will not do anything without consulting and informing the Buyer first. This will build a level of trust that will pay off down the road. Trust that the Broker is ethical and knows what he/she is doing is key here.
There is a lot more to the NAR settlement, but this is the part that will impact Buyers (and Sellers) the most. I have attached both a flowchart showing the process by which the Buyer and Broker can have the discussion, as well as the TRX 1507 Short Form as well.
Please contact me with any questions.
Guide to Broker Commissions:
TRX 1507 Short Form:
