In 2019, a group of home sellers filed a class-action lawsuit against the National Association of Realtors (NAR). It claimed antitrust violations and alleged the association's practices inflated commissions. The DOJ was concerned that Real Estate agents were making consumers feel like they couldn't negotiate commissions, especially on the buyer side.

In March of this year, NAR signed a settlement agreement to 1) pay out a ton of money and 2) make some rule changes.

I use the term “buyer agent” and “buyer broker” interchangeably to simplify. Buyer agents are independent contractors of brokers and working on behalf of the broker, and any compensation earned by the agent is filtered through their broker first.

WHAT STAYS THE SAME for buyers after this settlement

Compensation is STILL fully negotiable. There has never been a standard of what Realtors charge; it was, and is staying, negotiable. There has never been price fixing between agents/brokerages. There was never a standard or minimum commission to list on MLS.

Buyer agreements STILL state how much a buyer agent is compensated. Here it is in the exclusive buyer representation agreement.

Those things have been in Minnesota forms. Quality control was the piece missing - are agents discussion forms with buyers thoroughly? A core piece of the settlement is an attempt to increase and clarify these conversations between buyers and agents.

WHAT THE SETTLEMENT CHANGES

Buyers must sign a written agreement with an agent before touring a home. It can be as temporary as a one-time showing agreement to an exclusive buyer representation. Agents CANNOT communicate offers of compensation on the MLS or subsidiaries. We used to be able to see the compensation a seller was offering online. Not anymore. 

Now, buyer agents must contact the listing agent directly to get information about compensation. Listing agents can add compensation to emails, personal websites, lawn signs, etc. but cannot share it on any MLS or via MLS-owned spaces.

CONCLUSION

Buyers should understand how their agent is getting compensated. They should have before, they REALLY should now. Talking about agent compensation is a key piece of every buyer meeting I have. It’s something I never understood before becoming an agent myself.

This is the biggest purchase ever and it’s crucial that buyers entering the market understand where their money is going and how others involved in the transaction are paid. How do you build a strong and trusting relationship if pretty key aspects are lurking in the unknown?