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What is everyone fighting about?! 

 The real estate industry made headlines last week due to a lawsuit settlement involving the National Association of Realtors.  You may have heard about this, as it’s not only been all over the headlines but likely all over your social media feed as well.  Realtor commissions are the focus of this settlement, specifically whether or not a seller should have to pay a total commission that is split between the buyer’s agent and their own realtor, known as the listing agent.  It was argued (and won) that requiring the seller to pay the realtors on both sides of the transaction is a violation of antitrust laws.  Now the NAR may ban realtors from listing a commission for a buyer’s agent in the MLS. 

If you are looking to buy or sell property and wondering how this news impacts you – let me help clear it up. 

It has been standard for the seller of a property to pay 5-6% in total commission that was split equally between the two realtors involved in the escrow transaction as mentioned. 

If this NAR settlement passes court approval, it could go into effect this July. 

This would mean that as a seller, you can negotiate with your agent whatever commission structure you feel is appropriate.  You do not have to agree to pay 5 or 6%.  Here’s my best advice.  Choose your agent carefully because in fact, this has always been the case.  Find someone you can really trust and then….trust them.  Seek their expert advice on what commission you should offer and market in order to move your property for the best price within a timeline that works for your plans. 

If you are a buyer, please don’t panic and please do not sign a buyer broker agreement that you don’t understand.  A buyer broker agreement is a contract you sign to hire a realtor and enter into a binding relationship.  More on this in a second. You’ll also want to find a realtor you can trust and then you can go over a commission structure with them.  You can discuss whether you are willing to pay them for the services they provide or whether they will need to include in every offer they submit on your behalf, terms that would require their commission come from the seller’s proceeds. 

Buyer Broker Agreements 

Let’s talk about these because I think they are going to become a much more common practice.  When you hire a realtor, they will go over their duties owed (basically outlining what their job is, what they will be doing for you) and then this agreement.  Before you sign one of these, it’s important to know and check a few things.  I will start with the easiest red flag to identify.   


How is the realtor presenting this document to you?  Are they explaining it line by line or has it been stuffed into a pile of other papers they are trying to rush you through signing?  The reality is, if they are offering you full transparency about why you are signing this document, what it means and answering all of your questions on it – you won’t even have to worry about the following red flags because you found one of the good ones when it comes to realtors. 


Remember this for future reference: Never sign a contract without an end date.  How long will this buyer broker agreement be valid?  It seems the standard locally is six months, but the realtor can list any amount of time.  If you close on a home within the time period specified on the Buyer Broker Agreement, then the agent is able to collect a commission and you are liable for that.


Commission Amount 

A realtor can list any percentage on this agreement.  This could get tricky even if the seller is offering compensation to both agents.  If the buyer broker agreement you signed specifies that your agent will be paid 3% of the sales price and you close on a home where the seller was offering 2% to the buyer’s agent, then you would be responsible for paying that 1 percent difference. 

Special Clauses 

Some buyer broker agreements will include a clause that if the realtor has shown you a home – as in they physically took you to view that property – and you end up purchasing it even after the end of your buyer broker agreement expiration, that you will be required to pay their commission. 

How will this affect your preapproval? 

If you are a Veteran, the VA does not allow you as a buyer to pay realtor commissions.  It is very important for your realtor to be aware of this so they can make sure your offer includes terms for the seller to pay their commission from their proceeds.   

Closing costs like realtor commissions are not typically financeable.  We are now waiting for guidance from the agencies on if there will be any upcoming changes allowing buyers’ agents’ commissions to be financed.  And you know I will keep you updated. 



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