What is steering? 3 scenarios to consider 

The commissions lawsuit headlines have focused on the big picture: massive monetary damages, new rules and existential threats to the industry. But down at ground level, agents will begin feeling the effects in August as they figure out how to navigate fee discussions — without getting into hot water.

One undercurrent throughout the Sitzer/Burnett trial was the allegation of steering and its role in commission fees. The quick and punitive verdict in October, followed by NAR's March 15 settlement, suggest that merely the perception that agents may be steering homebuyers away from listings with low or zero commission offers could be enough to spur more lawsuits.

While some brokerages have introduced training programs designed to address the new rules, many agents still have questions. Some have taken to social media, posing "what if" scenarios and inviting discussions.

Real Estate News connected with Ed Zorn, VP and general counsel at CRMLS, to get his take on potential steering-related scenarios.

Zorn has spoken at length about steering risks in a post-settlement environment, and he shared his thoughts about three scenarios agents could face. Note: Zorn's responses are solely his opinions and are not intended as legal advice.

Scenario 1

As you're putting together a buyer agreement, your client says they'd rather look at houses where the seller is willing to pay the buyer agent fee — so you only show houses that meet this criteria. Is that steering?

This is one of those gray areas that could get agents into trouble, Zorn said, because the agent is making an assumption that could be incorrect. How do you determine a seller's willingness to offer compensation if they haven't seen the offer? After all, Zorn noted that last year, 40% of all the transactions on the CRMLS involved some sort of concession, but they may not be spelled out up front.

Zorn said if he were facing this scenario, he wouldn't limit showings to homes where the seller was offering some form of buyer agent compensation. "You should show every house. And you should put an offer on every house, because you don't know what that seller will actually take or not," Zorn said.

Agreeing to only show certain homes means giving up an opportunity to show your value as an agent, Zorn said. Flexing your negotiation skills — including negotiating price and fees — can help a buyer get a home that checks all the boxes, even if the seller didn't originally offer a concession.

If the seller balks at the offer, that is when the negotiation work begins: Researching comparable properties to see if concessions were made, comparing closing sales, or potentially making an offer over list price (with the client's approval, of course), with the extra money going toward the commission fee.

So, it may not be to the buyer's advantage, but is it steering? Probably not, said Zorn.

"What makes this scenario interesting is that it's the client saying they'd prefer to see certain listings, so that suggests not steering," Zorn said. 

What's key here is the client is making the decision, not the agent, Zorn said.

Scenario 2

You haven't discussed this directly with your client, but you're pretty sure your buyer will have trouble scraping together your fee if they find a home where the seller is not willing to include it as a concession. With that in mind, you only show listings with the possibility of a concession or other indication of compensation. Is that steering?

Compared to the first scenario, where the client has stated a preference, this is wading into murkier waters — many lawyers would be ready to pounce on a situation where you, the agent, are making commissions-related decisions without discussing them with your buyer.

"The broker in this scenario is not directly talking to the client," Zorn said. "You're taking the decision-making process away from the client and putting it in the hands of the buyer's agent. You're limiting what your buyer may have access to."

Scenario 3

A buyer spots a house for sale on a home search site, and their agent sees that no concessions are being offered. The agent lets the client know there probably won't be a concession that could be used to pay commission fees, and the client decides to move on to other listings. Is that steering? 

It's not steering, said Zorn, because the client is making an informed decision — but he would question the assumption that no concession will be offered. 

Perhaps the agent wrote up an offer for a different client on the same house, and during the negotiation process was told that concessions were off the table. The agent should convey that information to the current client and let them decide how to proceed — while noting that every negotiation is different.

But if the buyer agent just looked at the MLS listing and didn't see any concessions, or even if they called the listing agent and were told there were no concessions being offered up front, that doesn't mean concessions won't come into play. And either way, all information gathered should be passed on to the client.

"There has to be actual knowledge, not an assumption," Zorn said. "Otherwise you're giving bad information. This could be steering if you don't really know."

Is the client always right?

If steering is based on who is making decisions, will agents always be in the clear if they simply follow their client's direction? 

Not necessarily, said Zorn — there are other factors to consider. If the client is providing direction but is ignorant about aspects of the home search and offer process, the agent has a responsibility to offer guidance.

"You still have your fiduciary duty as a buyer's agent to make sure that if your client gives you a direction… that it's an informed instruction," Zorn said.