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The DOJ vs. NAR Why It Changed the Buyer Brokerage Agreement

1/27/2022

4 Comments

 
Picture
​The U.S. Department of Justice (DOJ) and the NAR are engaged in an ongoing lawsuit filed by the DOJ in November 2020.  The DOJ alleges, among other allegations, that some NAR rules are illegal restraints on REALTOR competition. In particular, for this conversation, the DOJ alleges that NAR’s policies prohibit transparency to the consumer regarding buyer broker commissions.
 
The lawsuit has already gone through multiple phases, including a settlement and then withdrawal of the settlement, so it may take a while to conclude.  However, transparency to the consumer regarding payment of commissions is likely going to become the nationwide rule. In an effort to conform to the eventual practice of full transparency, GAR has rewritten the commission section of the Buyer Brokerage Agreement in a way that complies with full transparency.
 
Buyer Agent Services are Not Free
The heart of the DOJ allegation is that the practice of agents saying or inferring that the buyer broker’s fee is free to the buyer because it is paid by the seller. The broker’s fee is in the purchase price so the buyer is paying. The new language clearly states the commission amount is owed by the buyer to the buyer’s broker and then clarifies that the full amount owed is “minus any commission paid to Broker by either the seller’s broker or the seller.” The new language also includes an acknowledgment that the commission, if any, being offered by the seller’s broker is usually set forth in the multiple listing service in which the property is listed.
 
When buyers want to see properties that offer less commission than agreed in the Buyer Brokerage Agreement, they need to understand that the difference in commission will be owed by them if that property is purchased.  Both FMLS and GaMLS require the Buyer broker’s commission to be disclosed in the listing, so they are already operating with transparency and the commission to be paid is known.  Sometimes the seller or seller’s agent does not list in the multiple listing services, such as some builders. Investigation will be needed, so that your buyer – and you - know the facts. 
 
Emphasize the Value You Bring
This change reflects what may be the start of an eventual shift in how real estate brokers working with buyers are paid. Buyer’s brokers will need to be able to more clearly articulate the value of the services they perform to their buyer clients.
 
Great agents that are prepared to demonstrate their services as both valuable and necessary, will continue to thrive!  
4 Comments
Buyers Agent in Sydney link
3/22/2022 08:43:56 pm

Thank you for sharing your blog. Keep on posting.

Reply
john edward barry
10/5/2022 06:14:44 pm

In the third last paragraph, you say. "...Agents infer that 'buyer's agents services are free" Please do not cloud the discussion unnecessarily... You meant to say. "... Agents IMPLY.... " It is the public which ..wrongly.. "infers" that "buyer agents" product is free for the taking.. Both sides, .., seller's agents, and "buyer's agents... intentionally, and
culpably.... imply that the services of the "buyer's agent are free...,, Right now, the buyers think that the seller's agent is the source of all commissions In Calif..the Agency Disclosures are a masterpiece of bafflegab... The Federal Laws need to throw this all out, and adopt an "Eighth Grade Understandability" standard for any "Disclosures"..

This is NOT rocket science, and it is clear that there can be NO linkage between a buyer's agent and a seller or seller's agent........
jack barry, a R.E. broker for 40 years, in Cal.

Reply
John White
1/3/2023 01:55:33 pm

What is being overlooked is the fact that now the Buyer will have to pay for the Buyer's Broker commission out of their own pocket instead of having that amount rolled into the home mortgage. I fully agree the amount being paid should be disclosed, however, it would usually be better for the Buyer if the Seller pays all of it as far as I'm concerned. What bothers me the most and is not mentioned here is the (from what I understand) illegal tying agreements the Realtors have with companies like Supra so that non-Realtors do not have access to show homes for sale without the key for the electronic keyboxes.

Reply
Brett
2/1/2023 11:47:44 am

If buyers cannot roll their commission payments into the mortgage as they currently do then the service will take a nosedive and the price point of homes will as well. Nobody is going to do this for free and the expense of showing property is only going to increase with what's going on in the world. More cash on hand will be required to purchase further moving the goalpost for so many buyers. This will be a net negative for the industry.

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