Editor’s Note: The Buyer-Agent Playbook is a new iteration of RISMedia’s biweekly Playbook segment, specifically centering on buyer agency and how agents are navigating the changes and trends in a post-NAR-settlement environment. The series will provide brokers and agents with insights and information to ensure they not only survive, but thrive in these challenging times. Industry professionals explain the strategies they’re employing and unique ideas they’ve formulated. Tune in every Thursday for another addition to the series.
In the wake of the National Association of REALTORS®’ settlement of seller-side commission lawsuits, compliance and compensation are two topics of discussion among buyer agents looking to move forward in their careers—as well as establish new ways to ensure transparency with clients.
While experts believe that compliance with the settlement requirements is becoming increasingly more common in practice, compensation should be addressed with prospective buyers when guiding them through the transaction.
Committed to compliance
Alyssa Soto Brody—real estate broker and co-founder of Powered by DMT, a New York City- and Miami-based brokerage—is seeing agents in the New York City market, specifically, effectively implement new standards.
“Compliance is already becoming increasingly evident in practice. In New York City, for example, we’re seeing agents implement these new standards effectively,” says Brody.
Brody confirmed that two key details are imperative: first, whether or not the buyer is prepared to sign a buyer broker agreement, and second, who is going to be paying the compensation.
“These measures are designed to ensure transparency and clarity throughout the transaction process, making sure all parties are fully informed from the start.”
“I usually identify (what compliance looks like) in one sentence, which is that the customer’s decisions direct our actions,” explains Kendall Bonner, vice president of Industry Relations at eXp Realty. “Basically, agents should give a client or customer direction, in writing, whenever possible. But we should be allowing our customers to make the decisions. We should be giving them advice, and then they should be giving us decisions about how they would like to receive (information). Again, so long as it’s lawful, it’s legal, what (new industry rules) are asking us to do, and it’s according to state law.”
Addressing compensation with potential buyers
According to both Brody and Bonner, agents should absolutely be addressing compensation with prospective buyers. Addressing compensation is imperative, and should be a transparent, comfortable conversation initiated from the beginning of any potential transaction.
“Addressing compensation should be a fundamental part of the conversation from the very beginning,” says Brody. “During initial meetings with prospective clients, the focus should be on clarifying and enhancing transparency. Instead of providing a hard number, agents should emphasize the commission as a percentage. This approach not only maintains the integrity of their compensation structure, but also helps preserve the perceived value of their services.
“At the outset, any brokerage manager should mirror the actions of their agents by directly asking sellers if they are willing to offer compensation,” continues Brody. “As we move into a seller’s market, this dynamic will evolve. It will become essential to educate agents on how to showcase their value as buyer’s agents. Helping them highlight their expertise and the benefits they bring to buyers will be key in the shifting landscape.”
From Bonner’s perspective, there is no harm in explaining to customers the changes that have come about as a result of recent settlements—because these new changes have the potential to impact consumers, too.
“I do think that we should be talking to our customers about the changes that have occurred as a result of the settlement, because the changes impact them,” she explains. “For example, notifying sellers that, as a result of the (settlement) changes, we are no longer required to, nor are we able to offer compensation on the MLS. That’s one effective change for sellers. And we should be notifying our buyers that as a result of the settlement changes, the buyer, and ourselves as agents, they need to hire us, and we have to disclose our fee to them. That way there’s transparency and clarity for the customer, the buyer, what they’re paying and what they’re getting for that payment.”
Bonner goes on to note that an agent should be disclosing the fee they’re charging their customer, with a number attached to it.
“I think that is the case on both sides, because if we recall on the settlement side, there are requirements for compensation. The buyer agreement needs to have a rate of compensation. How it’s determined, it must be definitive and objectively ascertainable.”
Menu of services
State to state, the legality of a menu of services can vary, and Brody and Bonner have somewhat different opinions as far as what it could mean for brokers and agents.
While Brody feels that a menu of services could have a negative impact on the personalized value provided by agents, Bonner is somewhat in favor, as long as it doesn’t compete with an agent’s fiduciary duties.
“At Powered by DMT, we have not yet developed a menu of services. As the industry continues to evolve, our priority remains on demonstrating the intrinsic value that a buyer’s agent offers directly to the buyer,” says Brody. “Implementing a menu of services should be considered only as a last resort. Adopting such an approach risks positioning oneself as a transactional broker, which could potentially diminish the personalized value that all of our agents provide.”
“I do believe a menu of services could be allowable so long as it doesn’t compete with an agent’s fiduciary duties required by law,” explains Bonner, “so speaking state to state, it’s difficult. Every state has a different agency and/or fiduciary requirements between their REALTOR® and the customer—or the consumer. So you cannot leverage a menu of services that diminishes or reduces fiduciaries that would not be allowed by state,” which is likely why brokers may answer this question differently from state to state.
“But where it’s allowable, I think that it absolutely makes sense,” concludes Bonner, “because we’re now in a value proposition model where consumers are going to have varying needs in terms of what value they expect or would want from an agent. There are going to be some very sophisticated consumers who need less work, and they want to pay less, versus consumers who need more and are willing to pay more for the value they’re receiving.”
