During a virtual open house hosted by Keller Williams to answer agent and broker questions about the settlements in the commission lawsuits, the overwhelming message was for real estate professionals to focus on what they can control.
“Don’t panic. Remain calm, trust that you are in the right place and go sell real estate,” Wendi Harrelson, the president of Keller Williams Realty International-owned regions, said during the presentation on Monday.
Harrelson — along with Keller Williams executives Mark Willis, Jay Papasan and Jason Abrams — addressed questions that agents and brokers had sent in prior to the presentation. The executives said they received more than 150 questions. Although not all of the questions were answered during the call, Keller Williams said it would be publishing a list of Frequently Asked Questions to address all queries.
Cooperative compensation
The vast majority of questions addressed on the call dealt with whether or not buyer’s representation was going away, and how agents will get paid for the services they provide to clients.
The team of executives first addressed the commissions, noting that they have always been negotiable. Under the terms of the settlement agreements reached by both Keller Williams and the National Association of Realtors (NAR), cooperative compensation is still allowed.
“Cooperative compensation is still legal,” Papasan stressed. “There is simply a new NAR rule that applies to all NAR member and NAR MLSs that does not allow cooperative compensation to be offered on the MLS.”
From there, the executives went on to address questions of where and how agents could advertise offers of cooperative compensation. They noted that NAR’s settlement prohibits disclosing offers of cooperative compensation, broker compensation or total broker compensation, but it does not address including remarks noting that buyer agent compensation will not be offered.
While this may be similar to how agents in some MLSs note that sellers are willing to provide concessions, Papasan made it clear that seller concessions and commissions are not the same thing.
“Seller concessions is money that is being given by the seller directly to the buyer,” Papasan said. “The buyer can use those funds for anything they would like, including paying their agent, if they choose.”
Additionally, the panel noted that while agents will no longer be allowed to advertise offers of cooperative compensation in the MLS, they can do so on their own websites, in social media posts and emails, or any other way they might typically market a property. Cooperative compensation offers can also be — and should be, if the client wishes — included in purchase agreements.
Buyer-broker agreements
Another hot topic on the call was buyer representation agreements, which will become mandatory under the terms of NAR’s settlement agreement.
A point highlighted for this topic is that a listing agent will be able to show a buyer their listing as long as they are not representing the buyer and not being compensated for brokerage services by the buyer. Importantly, however, when an agent shows a listing that is not theirs, they must execute a buyer representation agreement.
A large portion of the discussion surrounding buyer representation agreements was about how agents would get paid. In addressing a question about what to do if a buyer can’t afford to pay their agent out of pocket, the panel advised that after the parties agreed upon compensation in the buyer representation agreement, they would then include that amount in the offer they submit and negotiate it with the seller.
The panel also answered questions about what would happen if a seller was offering cooperative compensation, but the amount was more than what the buyer had negotiated to pay their agent. According to the panel, the agent would not be allowed to keep the excess funds and the buyer could instead use it to possibly negotiate a lower sale price for the property.
While the Keller Williams executives noted that there were several changes on the horizon for the real estate industry, they attempted to dispel some of the panic that has taken hold of the industry in the wake of NAR’s settlement news.
“These changes are going to all get resolved when we get comfortable with them and we don’t have to think that the sky is falling,” Willis said. “In essence, the changes are the changes. The dust is settling. We’ll learn how to navigate the new rules and we have time to get clarity about that.”
Although Willis expressed confidence that clarity will emerge, executives noted that quite a few unanswered questions remain — including uncertainty for buyers approved for Federal Housing Administration (FHA) and U.S. Department of Veterans Affairs (VA) financing.
“A lot of you all have asked us about VA and FHA and the truth is, we just don’t know yet,” Abrams said.
“There is a ton of incentive for them to make sure it changes,” Papasan added. “Nobody wants our first-time homebuyers, no one wants our veterans to be shut out of the market, so there will have to be some changes made. We just don’t know what they are yet.”
Best practices
With many agents feeling anxious about navigating these changes, the panel noted that there are still four months until they come into effect.
“We have a great opportunity to document and learn what best practices are,” Willis said. “While we may not know all the best practices today, here is what we know. In the next 30 to 45 days, as we begin to adapt, we will learn best practices.”
Abrams added that agents can figure out which of the best practices fit into their business and augment them over time to make their businesses even stronger.
In addition to figuring out best practices, Harrelson said agents should be working on how best to present their value to clients.
“Lean into the new rules around the buyer’s representation agreements and use them to have successful conversations about your value,” Harrelson advised.
Although there is no doubt that the real estate industry is facing some major changes, the panel reassured viewers that the fundamentals of selling a house have not changed.
“I think everybody rushes to complicate, but the answers are often found in simplicity,” Abrams said.
