So putting this out there publicly, I don’t want to get criticized by people who don’t agree. But I have not signed a buyer agency agreement in 22 years. I’ve been in the business for 23 and I’ve sold well over 850 homes. The people that I don’t trust I let go of and the people who don’t care for me I let them go. the few transactions I have lost were well worth somebody slamming me at the local bar because I forced them to pay me. What is most frustrating for me is being forced to do my job in a way that I don’t believe is best for me. I would much prefer compensation to be determined at the time of contract. The lack of clarity that we have been given is disheartening. For those of us who have raised a family on this job and are trying to someday retire we are left with lots of new forms that are difficult to understand. If it weren’t for you, I would’ve lost all faith in this business. Please keep posting. We all need you.
Excellent commentary. I would add that dual agency will be a thing of the past. Listing commissions will be compressed as it will be difficult to explain that the listing agent should get "2 sides of the same transaction." To your initial client, it is one transaction - Sell My House. The fact that the buyer came directly to you based on you marketing my product, you should not be compensated any further for doing your job. JMHO...
I definitely think that dual agency, as we know it, may be a thing of the past. I feel it instinctually, but can't quite put my finger on how it will evolve, just yet.
Completely disagree, these are two separate things. Dealing with a second personality with a second set of agendas is definitely worth higher pay. You can create win-win situations where both parties are very happy with the outcome. But you have to be good at it to be able to do that. I would make that very clear to the seller in the listing appointment and get them on board so that they have clear understanding. The goal is to get the house sold, as a listing agent marketing is my biggest focus. It’s very different than representing two parties needs toward a successful outcome.
I understand that ls the broker perspective, however let’s de-construct this process. As the listing agent, your job is to market and sell the house. To act as a fiduciary for your clients interest and make sure that their goal is being met, for example exposing their house to the market and a large group of buyers, handle the transaction smoothly. On that part we agree. Now, what dual agency will be saying is, “If I do my job and bring in potential buyers to you, my client, I will also represent the buyers and their interests, but don’t worry I will treat both of you fairly and honestly and represent both of you equally.”
There are so many potential perils with this going forward that it can’t nor should it survive. What happens if one side agrees to compensate more than the other? Now that the fee is de-coupled, why should I compensate you more for doing the job I hired you for in the first place? Because you have to deal with another person isn’t a strong enough answer because to sell the home you have to deal with another person.
Think about it from the consumer perspective… you are using my asset to find additional clients for your business and charging me more for it.
If you thought the attorneys made NAR look foolish on the stand before, wait for these lawsuits….
Enforcement will be the biggest challenge for MLSs over the next year, mostly because of interpretation conflicts, but staffing will also be an issue for small MLSs.
All due respect to volunteers on MLS Compliance Committees, but if Rob, Ed Z, and other industry Attorneys can't agree, how will THEY going figure this out? Some of this needs to be adjudicated soon.
Perhaps, I'm wrong, but what elements of the settlement will the MLSs be enforcing? I can imagine enforcing rules related to placing compensation in areas such as remarks, or photos, or in other creative places in the listing. Also, managing listing data feeds consistent with the settlement agreement, but what else? I think most of the enforcement will fall onto the shoulders of the Brokers/Managers where the agents work, and the courts.
All the enforcement of the settlement falls on the MLS. The model MLS rules from NAR have been drastically revised to address this. The MLS will be in charge of enforcing the written agreements between buyers and buyer brokers as well as not allowing compensation in the mls.
Yes, I do see that rule in the MLS. So the MLS will be responsible for enforcing two key aspects of the settlement agreement. (if it's not an MLS rule, then there is nothing to enforce). What about open houses and having the proper notification signed by unrepresented buyers? Modifiying existing listing agreements on or before 8/17? (albeit a short-term issue). Making sure agents are selecting and using legally defensible buyer broker agreements? It would seem to me that there's a whole host of Broker education and management/enforcement that needs to happen that goes well beyond those two rules in the MLS...
Looking forward to your post on commercial bribery, sounds like something to be avoided at all costs. I am curious about your take on the following scenario that is "closer to where the DOJ wants us to be", that is, the buyer asks the seller (in the written offer) to pay the buyer's broker. So, if a buyer writes an offer that includes "Seller to pay buyer's broker $X at closing," and the seller makes a counter-offer where seller agrees to pay the buyer's broker, but at a higher sale price, is that commercial bribery, or is that the seller simply evaluating their bottom line (price - fees) and negotiating the top line (price)?
I'm not sure what you really mean by "No Hook" so I took a look at the CO forms you mentioned for reference.... Seems like the most recent version eliminates a "No Hook" clause. (No. BC60-6-24, see redlined version of section 7.3). https://drive.google.com/file/d/1AkMWMC-2TO5NwDgPaQceyBEI6MGseC_p/view
Regardless, since the settlement agreement apparently requires that BB agreements provide that:
"The amount of compensation must be objectively ascertainable and may not be open-ended (e.g., “buyer broker compensation shall be whatever amount the seller is offering to the buyer”);"
What exactly is a "No Hook" clause, and how does it meet that criteria?
The version you cited was from 2022 modified April this year. The one on their site now was modified 7/11/24.
What concerns do you think DOJ will have with CO's most recent form?
Perhaps CO eliminated "no hook" to comply with the settlement. No Hook to me means the agent must perform but the buyer doesn't have to pay. Isn't that the system in use by most agents today? "I show you houses and write your offer and help you to closing, but you don't pay, I get paid by someone else." So what's the point of making buyers sign a buyer broker agreement if option 7.3.3 is selected?
I never understood subagency and was actually practicing buyer broker representation before we had a name for it. In 1992ish when buyer brokerage became an NAR offering, I not only started to use a buyer broker agreement but I used to charge a $1500 retainer when working with a buyer. Circa 1994-97. Yep! The only thing that I don't like is having to have a trust account if either me or my agents charge a retainer. Thanks for this post...
I certainly hope you're right about "top buyer agents" because I love representing buyers and hate to think about giving up that part of my practice. These new developments make it very complicated to represent buyers and that is tragic for buying consumers. I also agree with you that we're going to see a big uptick in litigation by unrepresented and underrepresented buyers with buyer's remorse. Sellers take note. The lawyers will name everybody.
"See the decision by CRMLS to remove % and $ fields"...did I miss that decision somewhere? It's not removed, currently. I do think that's the right decision to minimize it being just a surrogate for display an offer of comp in the MLS.
CRMLS just announced that they are making this change on July 30th. (having just the yes/no field regarding concessions, and removing the % and $ input fields)
So putting this out there publicly, I don’t want to get criticized by people who don’t agree. But I have not signed a buyer agency agreement in 22 years. I’ve been in the business for 23 and I’ve sold well over 850 homes. The people that I don’t trust I let go of and the people who don’t care for me I let them go. the few transactions I have lost were well worth somebody slamming me at the local bar because I forced them to pay me. What is most frustrating for me is being forced to do my job in a way that I don’t believe is best for me. I would much prefer compensation to be determined at the time of contract. The lack of clarity that we have been given is disheartening. For those of us who have raised a family on this job and are trying to someday retire we are left with lots of new forms that are difficult to understand. If it weren’t for you, I would’ve lost all faith in this business. Please keep posting. We all need you.
Excellent commentary. I would add that dual agency will be a thing of the past. Listing commissions will be compressed as it will be difficult to explain that the listing agent should get "2 sides of the same transaction." To your initial client, it is one transaction - Sell My House. The fact that the buyer came directly to you based on you marketing my product, you should not be compensated any further for doing your job. JMHO...
I definitely think that dual agency, as we know it, may be a thing of the past. I feel it instinctually, but can't quite put my finger on how it will evolve, just yet.
I hope so! Dual agency has been a travesty for consumers.
Completely disagree, these are two separate things. Dealing with a second personality with a second set of agendas is definitely worth higher pay. You can create win-win situations where both parties are very happy with the outcome. But you have to be good at it to be able to do that. I would make that very clear to the seller in the listing appointment and get them on board so that they have clear understanding. The goal is to get the house sold, as a listing agent marketing is my biggest focus. It’s very different than representing two parties needs toward a successful outcome.
I understand that ls the broker perspective, however let’s de-construct this process. As the listing agent, your job is to market and sell the house. To act as a fiduciary for your clients interest and make sure that their goal is being met, for example exposing their house to the market and a large group of buyers, handle the transaction smoothly. On that part we agree. Now, what dual agency will be saying is, “If I do my job and bring in potential buyers to you, my client, I will also represent the buyers and their interests, but don’t worry I will treat both of you fairly and honestly and represent both of you equally.”
There are so many potential perils with this going forward that it can’t nor should it survive. What happens if one side agrees to compensate more than the other? Now that the fee is de-coupled, why should I compensate you more for doing the job I hired you for in the first place? Because you have to deal with another person isn’t a strong enough answer because to sell the home you have to deal with another person.
Think about it from the consumer perspective… you are using my asset to find additional clients for your business and charging me more for it.
If you thought the attorneys made NAR look foolish on the stand before, wait for these lawsuits….
Enforcement will be the biggest challenge for MLSs over the next year, mostly because of interpretation conflicts, but staffing will also be an issue for small MLSs.
All due respect to volunteers on MLS Compliance Committees, but if Rob, Ed Z, and other industry Attorneys can't agree, how will THEY going figure this out? Some of this needs to be adjudicated soon.
Agency law is state by state, so the state will enforce too
Perhaps, I'm wrong, but what elements of the settlement will the MLSs be enforcing? I can imagine enforcing rules related to placing compensation in areas such as remarks, or photos, or in other creative places in the listing. Also, managing listing data feeds consistent with the settlement agreement, but what else? I think most of the enforcement will fall onto the shoulders of the Brokers/Managers where the agents work, and the courts.
All the enforcement of the settlement falls on the MLS. The model MLS rules from NAR have been drastically revised to address this. The MLS will be in charge of enforcing the written agreements between buyers and buyer brokers as well as not allowing compensation in the mls.
You believe the MLS's will provide arbitration between buyers and buyer agents?
No, they are tasked with enforcing the requirement that Agents have written agreement with buyers.
Good luck and godspeed
https://www.inman.com/2024/05/08/godspeed-enforcement-of-nar-settlement-changes-shifts-to-mlss/amp/
Yes, I do see that rule in the MLS. So the MLS will be responsible for enforcing two key aspects of the settlement agreement. (if it's not an MLS rule, then there is nothing to enforce). What about open houses and having the proper notification signed by unrepresented buyers? Modifiying existing listing agreements on or before 8/17? (albeit a short-term issue). Making sure agents are selecting and using legally defensible buyer broker agreements? It would seem to me that there's a whole host of Broker education and management/enforcement that needs to happen that goes well beyond those two rules in the MLS...
Hi Rob, good stuff as usual!
Looking forward to your post on commercial bribery, sounds like something to be avoided at all costs. I am curious about your take on the following scenario that is "closer to where the DOJ wants us to be", that is, the buyer asks the seller (in the written offer) to pay the buyer's broker. So, if a buyer writes an offer that includes "Seller to pay buyer's broker $X at closing," and the seller makes a counter-offer where seller agrees to pay the buyer's broker, but at a higher sale price, is that commercial bribery, or is that the seller simply evaluating their bottom line (price - fees) and negotiating the top line (price)?
I'm not sure what you really mean by "No Hook" so I took a look at the CO forms you mentioned for reference.... Seems like the most recent version eliminates a "No Hook" clause. (No. BC60-6-24, see redlined version of section 7.3). https://drive.google.com/file/d/1AkMWMC-2TO5NwDgPaQceyBEI6MGseC_p/view
Regardless, since the settlement agreement apparently requires that BB agreements provide that:
"The amount of compensation must be objectively ascertainable and may not be open-ended (e.g., “buyer broker compensation shall be whatever amount the seller is offering to the buyer”);"
What exactly is a "No Hook" clause, and how does it meet that criteria?
Thanks again for your insight!
Hi Mike -
I'm curious where that new version is from. I'm going by what's on the Colorado DRE website here: https://drive.google.com/file/d/1MltGH-pwXhT283XKpd79ZsH8mOBwqj-j/view
If the redlines in 7.3.3 are final approved forms, then I believe the DOJ/FTC will be calling on Colorado DRE soon.
Hi Rob - the link I posted came from this main page: https://dre.colorado.gov/real-estate-broker-contracts-and-forms
The version you cited was from 2022 modified April this year. The one on their site now was modified 7/11/24.
What concerns do you think DOJ will have with CO's most recent form?
Perhaps CO eliminated "no hook" to comply with the settlement. No Hook to me means the agent must perform but the buyer doesn't have to pay. Isn't that the system in use by most agents today? "I show you houses and write your offer and help you to closing, but you don't pay, I get paid by someone else." So what's the point of making buyers sign a buyer broker agreement if option 7.3.3 is selected?
Yep; I see that now. Wow, I think the FTC will be calling on the Colorado DRE. That's a helluva change.
What do you think they are doing wrong?
I never understood subagency and was actually practicing buyer broker representation before we had a name for it. In 1992ish when buyer brokerage became an NAR offering, I not only started to use a buyer broker agreement but I used to charge a $1500 retainer when working with a buyer. Circa 1994-97. Yep! The only thing that I don't like is having to have a trust account if either me or my agents charge a retainer. Thanks for this post...
I certainly hope you're right about "top buyer agents" because I love representing buyers and hate to think about giving up that part of my practice. These new developments make it very complicated to represent buyers and that is tragic for buying consumers. I also agree with you that we're going to see a big uptick in litigation by unrepresented and underrepresented buyers with buyer's remorse. Sellers take note. The lawyers will name everybody.
Will 2.5% to 3% listings become more common? The listing firm is paid that amount.
"See the decision by CRMLS to remove % and $ fields"...did I miss that decision somewhere? It's not removed, currently. I do think that's the right decision to minimize it being just a surrogate for display an offer of comp in the MLS.
It's coming out on 8/14.
CRMLS just announced that they are making this change on July 30th. (having just the yes/no field regarding concessions, and removing the % and $ input fields)