Trends 2024: 6 things brokerage leaders should do as buy-side shifts loom
As lawsuits over agent compensation multiply, it’s important for leaders to assess agreements, training and how buyer agency adds value to their business.
Editor's note: Since 2006, the Swanepoel Trends Report has provided in-depth research and analysis to help leaders understand the forces shaping residential real estate. This exclusive series of excerpts highlights each trend featured in the 2024 report, which was released in November 2023.
The Buyer Brokerage Playbook: In July, with lawsuits over compensation headed for the courtroom, T3 Sixty urged the industry to prepare for "foundational change" to the way agents get paid. Now, a jury has weighed in, to the tune of nearly $1.8 billion dollars, and more lawsuits have been filed. It's more important than ever for brokerages to take action.
This excerpt outlines six specific steps brokerage leaders can take as they navigate a changing compensation landscape.
Benchmark and measure current buyer business
To understand the potential impact of potential buyer brokerage changes, brokers should benchmark their current buyer brokerage business. Determining how much business is related to buy-side cooperating compensation can be a big motivating factor in deciding how much effort to put into updating buyer agent practices.
Most brokers' back-office systems should have reports available that can determine the percentage of gross commission income received from cooperative buyer commission. If this percentage is significant, brokers know they must take action.
Review and update buyer representation agreements
Many brokerages have buyer representation agreements, or agreements from their local or state board or real estate commission.
These agreements should be reviewed, to determine if they allow for specification of compensation paid to the brokerage for buyer's agent work with a client.
An attorney familiar with your state's laws should be consulted on the specific language. Note also that if real estate agents are paid on an hourly basis, they may not qualify for the statutory independent contractor status.
Review and improve, or create, buyer presentations
If brokerages do not have a high-quality buyer presentation, they will need to create one and teach their agents that work with buyers on how to use it with potential buyer clients, with the goal of securing a buyer representation agreement.
Review your website and public marketing for buyer services language
Any marketing you have related to buyer services must be checked that it does not indicate that buyer agent's services are free. This is per NAR guidelines adopted in 2021.
Prepare and train listing agents
Listing agents will likely be asked by sellers whether they should offer buyer agent compensation. They should be prepared for this question and be able to discuss the real pros and cons of offering buyer agent compensation.
These are items for which listing agents should be prepared. They include:
Explain how agents are compensated on both sides of a transaction.
Explain to sellers that offering compensation to agents who produce buyers makes their property more achievable for more buyers, including first-time homebuyers, veterans, etc.
Brokers should also provide material to their agents for listing presentations about how agents are compensated.
Review and update buyer agent sales training
Similar to public marketing, brokers should review their sales training to ensure it does not include language that states buyer agent services are free. Also, brokers may need to update their sales training to reflect thorough treatment of how to conduct a buyer consultation, including reviewing agency roles, client versus customer relationships, and the value proposition of buyer agent services.
The core concepts of agency law, and differences between customers and clients, are very important for agents to be able to explain thoroughly, so that their services and the relationship can be easily understood by prospective clients.
Read the full chapter: Digital and printed copies of the 2024 Swanepoel Trends Report are available for purchase at T3 Trends.
Note: T3 Sixty and Real Estate News share a founder, Stefan Swanepoel.