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

1/27/2022

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!

6 Comments

Buyers Agent in Sydney link

3/22/2022 08:43:56 pm

Thank you for sharing your blog. Keep on posting.

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.

Evelyn Lewis-Wilson link

1/31/2024 09:15:11 pm

Everybody breathe. Lets just start with each state has "customary" ways of doing business and since we all now have to look at the DOJ is the giver of instruction, we all need to be careful. I can't imagine any agent would imply or infers their service is "free". Regardless of who pays, the Seller, listing agent or buyer or a combination of all three, it just needs to be made clear the assumption can't be the Seller has to pay. The seller can choose to pay. Many sellers still will pay the full commission if their situation warrants it. They need a fast sale, it is not an arms length transaction and many other reasons. Raising the price of the offer to roll in the brokers commission is questionable unless the buyer understands that will be a cost they pay over 30 years. Transparency will keep you out of the cross hairs. You can still write an offer and request the seller pay buy side commissions as long as the buyer is requesting it and it is presented with the original offer.

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.

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.

Kevin McMillen

5/18/2025 02:54:40 pm

Sad that the effort to make real estate sales more transparent has had just the opposite effect.

I don’t care what anyone says, it is the buyer who is bringing money to the closing table so they are really the one paying both sides of the transaction, yet as it is they have no say in the seller and their agents commission. How is that transparent?

In most sales the sellers and the buyers combined have a limited, finite amount that they can afford to pay agents. As it is now the seller’s side can be financed in the mortgage but the buyer’s side can’t. How is that fair? Especially when the buyer has no say in the seller’s agents commission.

Why should the buyer have to pay out of pocket but not the seller when both sides come out of the same pool of money? The money the buyer is bringing to the table.

If the entire sale is going to be fully transparent then both side’s commission needs to be negotiable all the way to the closing table. Since August of 2024 too many list agents are making commission deals with sellers, trying to get as much as they can and care nothing about the buyer’s agent. That attitude is not having the seller’s best interest at heart. One agent even told me he feels no need to worry about the adversarial side of the deal.

Well, it takes both sides to make a deal, so it would be in the seller’s best interest if that agent had some concern about the buyer and their agent.

The latest NAR mess has created a dog eat dog battle in real estate with the greed of many becoming a sad reality.

As I said, the money available to pay agents is usually finite, and many, if not most buyers being unable to pay out of pocket. So if a seller is willing to pay (remember it is the buyer bringing the money to the table anyway, so who is really paying the list agent?) 4%, 5%, 6% and the list agent talks them into paying them 3%, 4%, 5% that leaves only 1% for the buyer’s agent. Since the list agent isn’t making this information available to the buyer and their agent, how is any of this fair and transparent?

The buyer should have the right to know how much the seller is willing to offer in commission that way they can fairly negotiate the contract. If the buyer knows the seller can only afford 4% and the seller is giving their agent 3% of that, the buyer should have the right to negotiate that in the purchase contract. Whether 2% for each side, 2.25/1.75 or whatever. If the seller still wants their agent to have 3% they can pay the extra 1% out of pocket. Why should the buyer have to finance the seller’s side when banks won’t allow financing of the buyer’s side other than calling it “seller’s concessions” and those concessions are limited based upon the type of loan.

In order to have fairness and total transparency the buyer needs to know the amount the seller is willing to pay in commissions, how much they are offering their agent and if there is any excess for their agent.

Again, this is being paid by the buyer in the long run anyway, so keeping it secret just causes more conflict.

The recent settlement has caused less transparency than there was before!

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

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