Buyer agreements work, sellers still willing to pay: Baird & Warner
Laura Ellis, chief strategy officer at the Chicago firm, says part-timers may not make it in the post-settlement world, but serious agents will excel.
Key points:
- Baird & Warner has already started using buyer agreements, and the company has seen real-world success from the practice, says Ellis.
- She sees a big opportunity for experienced, full-time agents to do more business but worries about the possibility of more dual agency situations.
- The Illinois-based brokerage was left out of the NAR settlement, but the company is exploring its options.
Even as the industry waits for the courts to finalize NAR's proposed settlement agreement and corresponding rule changes announced in March, the time to act is now, Laura Ellis, Baird & Warner's chief strategy officer and president of residential sales, told Real Estate News.
And as one of the country's largest — and oldest — independent brokerages, Baird & Warner is also navigating its own litigation fight, as the company is one of firms not protected under NAR's settlement agreement.
Making the most of buyer agreements
Buyer agency agreements are here to stay, Ellis said, noting that Baird & Warner had already prepared a buyer certification course for its agents before the Sitzer/Burnett ruling. Ellis added that Baird & Warner is a full-time, full-service brokerage where agents are expected to be able to present their value proposition.
Ellis said the brokerage has had "well over 1,400" of its 2,200-plus agents complete the course, and the training has already resulted in real-world success as agents apply the new best practices in their day-to-day business.
"We've had 40 situations so far in 2024 where some of the compensation was coming through the MLS, and then the balance of the compensation was coming through the transaction by the buyer asking the seller to pay it or the buyers writing a check," she said.
Many sellers still willing to pay buyer agents
While Ellis expects there will be more experimentation in agent compensation models — such as flat fees or sliding scales based on experience — she said that sellers are still "choosing with full transparency to continue offering compensation to the agent being bringing the buyer."
The reasons range from a seller's desire to ensure that their property is being marketed to the widest net of buyers possible, to understanding that not all buyers are capable of fronting the full cost of their agent commission.
"Many times, those first-time homebuyers are putting together all they can for their down payment and closing costs, and they don't have the funds to come out of pocket," Ellis explained. "People selling a home to those first-time buyers get it. So we have had virtually no sellers tell us that they didn't want to pay a buyer-brokerage fee."
Some agents will excel (as others drop out), but dual agency is a concern
"A full-service model is going to be more important than some of these 'no bricks and mortar' quickly growing companies where all of the trainings are online," Ellis predicts of the post-settlement future. "And the reason I say that is I think there's going to be far fewer agents in the business. The part-time or spare-timers are going to dissipate."
Prior to the NAR settlement, Ellis had already predicted that low-production agents would be negatively impacted by changes to compensation rules, because they will have a harder time showing their value.
"I do think that your highly accomplished expert professional Realtors are going to do more business," Ellis added. "I would argue that it's difficult to be competent and really great at anything if you do it once or twice a year."
But while some of the NAR settlement rule changes "are going to be really good for the profession" by allowing the most competent agents to rise to the top, Ellis said she also had concerns about listing agents and conflicts of interest.
"We are anticipating the possibility of buyers going directly to our listing agents and to the sellers thinking that they're going to save a lot of money because they're not represented," Ellis explained.
"There are some dangers for listing agents, mostly around inadvertently or unintentionally creating a dual agency situation. We want to make sure that they don't ever do that."
Going it alone in court
Baird & Warner is still involved in an active commissions lawsuit in Illinois. And with a residential transaction volume over $2 billion, the firm was one of over 90 independent brokerages left out of the NAR settlement. But the company does have options, and Ellis tells Real Estate News that B&W has yet to determine the best path forward.
"All I can really say is we're consulting with our legal advisors on what our options are. So we're getting advice right now," she said.