Last week, I blogged about the settlement between the National Association of Realtors (NAR) and the Department of Justice (DOJ) and how it impacts buyers. Today, I wanted to discuss how the settlement impacts sellers.
Background on the Settlement
The National Association of Realtors and the Justice Department reached a settlement on March 15, 2024, regarding the business practices of real estate brokerages and consumers. The Settlement stemmed from a series of class action lawsuits by sellers against real estate brokerages over commissions for buyer’s brokerages. While the DOJ was not a direct party in these suits, they were already investigating buyer brokerage compensation. The Settlement included practice changes that took effect on August 17, 2024.
How will this Impact Sellers?
Realtors can no longer show cooperating compensation (payment to Buyer’s agents) in the Multiple Listing Service. A Real Estate Brokerage may list the commission they are offering on its website or advertise it in a publication or online, but not in the MLS.
What does this mean for listings?
What we know for sure:
- There will be confusion for some time. The rollout has not been particularly orderly or well handled. Even the experts have questions.
- There will be new and different contracts for both Buyers and Sellers. As of August 17, the Hawaii Association of Realtors have a new Exclusive Right to Sell Listing Agreement, Buyer Representation Agreement, and a new Purchase Contract available. Existing listings either executed a new listing agreement or amended their current one. An amendment determined if and how the seller would compensate any Buyer’s Agents.
- Broker commissions are not set by law and are negotiable.
Important things for you to know:
- You may choose to offer compensation to the Buyer’s agent.
- You may also elect not to offer any Buyer’s Agent compensation.
- You may also choose to negotiate a Buyer’s Agent’s compensation as a part of any transaction.
- You may also offer additional concessions to a Buyer to help them compensate their Agent.
What we aren’t sure about:
- How will buyers and buyers’ agents react to the Settlement Agreement? Will Buyers agree to compensate their Buyers’ agents, or will they expect Sellers to continue to offer compensation?
- Will this settlement continue in its current form or be revised? It’s no secret that the DOJ doesn’t love the settlement. It sounds as if they would prefer new practices that prohibit any compensation from the seller to the buyer’s brokerage. The DOJ and NAR are set to meet again in November.
What We are Recommending to our Sellers
While it is the seller’s choice whether to compensate the buyer’s broker, we believe the wisest course of action is to continue offering a cooperating broker fee as was commonplace before August 17th, or at minimum, be willing to negotiate a commission for a bona fide offer from a Buyer’s Agent. The current market conditions favor buyers for most segments of the Maui Real Estate market. Shifting the commission to be an out-of-pocket expense for buyers may reduce a seller’s pool of prospective buyers.
