Negotiation will be the most essential skill for buyer agents
Once new rules go into effect — between July and September — agents will need to embrace “the new regime” to avoid liability, and to ensure they get paid.
Key points:
- In an address to industry leaders, T3 Sixty’s Jack Miller and CRMLS’s Ed Zorn urged audience members to train and support their agents as new rules roll out.
- The deadline to adopt rule changes is September 16, but NAR is urging the industry to have them in place by July to limit the risk of further litigation.
- Agents who want to hold on to the old ways of doing business “should get out, because it’s not good for the consumer.”
As the industry continues to adjust to a post-settlement world, agents and brokers have a new deadline to consider: September 16.
That's when new rules and practices need to be in place after U.S. Judge Stephen Bough gave preliminary approval to the $418 million NAR settlement on April 23. That means all agents need to be ready to use buyer agreements, and MLSs need to remove the offer of compensation field from their platforms.
The National Association of Realtors is pushing for these changes to be in place sooner — by July — to reduce the risk of further litigation.
Regardless of the deadline, industry professionals should remember a core issue behind these cases: a fear of steering, said Ed Zorn, vice president and general counsel at the California Regional Multiple Listing Service (CRMLS).
"So the concept of having a buyer engage with the person who's going to represent them and agree on that [buyer agent fee]… will actually enhance the concept of how you get paid as a buyer's agent. You get to pick what you get paid," Zorn told hundreds of real estate executives during a panel discussion at the T3 Leadership Conference last week.
But as agents — and consumers — adapt to the new way of doing business, expect some bumps along the way. During this transitional period, brokerages need to step up and provide additional training, particularly for less experienced agents, said Jack Miller, T3 Sixty CEO and fellow panelist.
"Agents who have less value to their consumer are really going to struggle because they're not used to negotiating their value," Miller said.
Zorn agreed, saying it's something to keep in mind during training.
"Are you training them for their early days, which are going to be different than their more experienced days?" Zorn asked those in attendance, suggesting additional tools like mentorship might be helpful. "There's lots of opportunity here as a broker to differentiate yourself on how you can leverage this potential con into a benefit."
In the 'new world,' negotiation skills will be key
Perhaps the biggest fear for brokers and agents as the September deadline approaches is what happens if the seller chooses not to offer buyer-broker compensation or concessions.
Zorn encouraged the audience to consider what buyer agents have been doing in the commercial real estate world, where there is no MLS and commissions are always negotiated. Buy-side agents will need to establish their fee in the buyer agreement before house shopping begins, so the seller and the listing agent can consider how (or if) they want to handle the fee as they evaluate offers.
"This new world is going to favor those with skills, those who can negotiate, those who can do some analysis of what goes into the price of a property, and what goes into some of the sales price is concessions," Zorn said. In other words, a buyer agent who understands pricing and can effectively negotiate concessions will have an advantage.
"So the ability to discuss that, to sell that, to negotiate that as a way to get your fee is a challenge — but it's not one that's really hard to overcome."
Embrace 'the new regime' — or 'get out'
Some agents will want to keep doing business as they always have, said Zorn and Miller — they may try to find workarounds to communicate with other agents about commission fees, which could result in the potential for steering.
The fear or perception of steering could create some degree of liability, even if steering never actually happens, Zorn said. Attorneys and regulators will be watching closely, waiting for the opportunity to bring more lawsuits.
Miller also noted that in the new world, where buyer agent agreements are signed before homes are shown, more consumers will understand agent fees. He pointed to a recent Redfin study that found 28% of buyers surveyed had no idea how much their agent was paid.
"We don't believe that regulators or the plaintiffs' attorneys will be satisfied until this number is a lot lower," Miller told the audience of real estate leaders.
"The new regime will make it obvious, and we think you should embrace that. And your agent should embrace that. If they're not willing to embrace that, then they should get out, because it's not good for the consumer."