The real estate brokerage industry is undergoing some changes, and Gibson Sotheby’s International Realty has been diligently preparing with new business practices to continue protecting and empowering our clients every step of the way. Buying a home is one of the largest financial transactions in a person’s life, so it's important to understand how the changes taking effect on August 17th will impact both home buyers and sellers. I invite you to read the full explanation from Colleen Barry, CEO of Gibson Sotheby’s International Realty.

*Originally published by Gibson Sotheby’s

There are a few changes happening in the real estate brokerage industry – all moving toward a deadline of August 17, 2024. These are the result of a proposed settlement between the National Association of REALTORS® (NAR) and class action parties. Some organizations have already made changes. Our agents have been diligently training and have been equipped with new simple, clear and concise client agreements and customer disclosures.

Gibson Sotheby’s International Realty intends to protect and empower our clients every step of the way. Our agents have been educating our Sellers and Buyers about their new options and the benefits of each. We will also explain the risks associated with the continued practices of the 12 MLSs (out of 500 nationwide) that have not opted into the settlement terms.

Below is a simplified explanation of the changes to our business practices and how they impact buyers and sellers:

Buyer Agents who are REALTORS® are now required to have a representation agreement with their Buyer clients before showing them homes. This agreement must outline the relationship, the services, and the fee for services. While Buyer Representation Agreements were required in other states, they were not in Massachusetts.

• Impact to Sellers: Since many Sellers will no longer be offering Buyer Agent compensation (see below), Sellers are likely to see the Buyer Agent fee written into the offer, so it is financeable, as it has been in the past.

• Impact to Buyers: This allows Buyers to have a better opportunity to negotiate and understand what they are paying their agents. Any Buyers who have been working with our agents prior to this change without an agreement or without a specified fee within that agreement, will need to sign a new agreement with our agent.

Buyer Agent Compensation will no longer be published in most MLSs. Sellers never have been required to offer Buyer Agent compensation. However, some MLSs had required offers of compensation — though they could be as low as $1.

• Impact to Sellers: Some sellers will select to offer as low as zero to Buyer Agents. However, they can expect that most Buyers will include their Agent's fee written into the offer, so it is financeable, as it has been in the past. Our agents will be giving a Listing Agreement Addendum to any property that is listed by our firm and is not under agreement when the change takes place.

• Impact to Buyers: This means that, in most MLSs, there will be no unilateral offer of Buyer Agent compensation coming from the Seller or Listing Agent. When there is, the information will be more challenging to find. Their agent will need to do additional research and outreach to find out if there is an offer and how much. Most Buyers will likely include their Agent's fee written into the offer, so it is financeable, as it has been in the past. Since those offers of compensation remain negotiable, we recommend that our Buyers write the Buyer Agent fee into the offer, without regard for what was offered.

Two MLSs in Massachusetts (MLSpin and LINK) have opted to continue to allow published offers of Buyer Agent compensation. But, the offer now comes from the Seller.

• Impact to Sellers: This option may put Sellers in a position of legal liability and potentially open them up to compensation disputes. It also exposes their agent and their agent’s firm to liability, as it goes against the proposed terms of the class action settlement.

• Impact to Buyers: While the offer is published, this offer might still be a point of negotiation. It is no longer a unilateral offer of compensation. In other words, the Seller's offer of Buyer Agent commission might be retracted, entirely or in part, during the negotiation with the Buyer. Sellers may use offers of compensation as a tactic to attract buyers. However, now the compensation amount offered may still be negotiated down, or removed entirely during the offer stage.

Some Sellers may continue to publicly offer specific Buyer Agent compensation amounts. Some Seller Agents and their agencies are having trouble navigating the changes and are encouraging Seller’s to make offers of compensation. 

• Impact to Sellers: While we encourage our Sellers to consider all offers, including those with Buyer Agent compensation written in as a condition of the offer, we are concerned that some Seller Agents are not explaining to the Seller their potential liability for lawsuits that MLSpin warns Brokers to explain. We also are concerned that this initial offer amount may weaken their bargaining position during negotiations.

• Impact to Buyers: Sellers may use offers of compensation as a tactic to attract buyers. However, now the compensation amount offered may still be negotiated down, or removed entirely during the offer stage.

What is not changing?

Buying or selling a home is still a challenging endeavor that occurs only a handful of times in a person’s life. It is typically brought on by other significant life changes, like a new job, a growing family, a death, an investment opportunity, or other stressful moments. There is a lot of expertise and wisdom that our agents bring to their clients. They provide very important services to their clients. They made a difference. That will never change.

We welcome any questions you may have about these changes.