The National Association of Realtors (NAR) settlement taking effect on August 17, 2024, will bring significant changes for buyers and sellers. Key changes include a rule that seller’s agents can no longer set the commission for buyer's agents in MLS listings (though it can be negotiated off-line) and a requirement for buyers’ agents to have written contracts with their clients for official representation that disclose the agent's compensation amount.
The settlement came much faster than expected, leaving real estate, relocation, and corporate mobility professionals just a few months until the August implementation.
As a mobility lead, here are some ideas to help you prepare:
- Review US domestic relocation policies. Alert internal stakeholders, finance, legal, and tax teams of the potential need for changes.
- Talk with your Relocation Management Company (RMC). Today, a significant portion of their revenue comes from referral fees which are paid directly to them as a percentage of Agents’ commissions. If this stream gets smaller or less reliable, will they be changing the way they charge for their work? If yes, costs for RMC services could go up.
- Engage with industry groups like Worldwide ERC for the latest news and best practices.
- Reach out to local real estate brokerages in any city where you have a significant number of moves each year. Ask how the changes will affect that market. Request a copy of the new standard buyer agent contract. In the past, if they existed, they tended to only detail protections for the agent/brokerage. Starting now, transparency is key. They should explain the duties and responsibilities and expectations for both the agent/brokerage and the buyer. They will also need to include payment details (flat fee, retainer, and/or % of sales price as commission) and a term of the agreement (many experts recommend 60 days).
- Address Buyer Broker compensation within the relocation package. As of today, buyer commission may not be financed as a part of most home loans/mortgages, so transferees MAY need to come up with large amounts of cash. Based on typical current cooperative models, this could be up to 3% of the purchase price. Decide whether your duty of care would allow transferees to forgo buyer representation altogether or to allow for limited support (flat fees for attending an open house or drawing up an offer letter). Buyer agents are important to transferees as they often give advice on the local housing market, neighborhoods, schools, and local services that can make a relocation successful. If you decide to cover it, be aware it will be considered taxable income to the transferee, and you may need to gross up the amount.
- Educate your transferees on what to expect. First-time buyers, lower income employees, or those from areas where buyer agency has not been the norm or from areas where buyer agents routinely advertised their services as “free,” will have more questions and concerns.
Major RMCs have not announced publicly whether they will need to change their revenue model from one based on referral fees (paid as a portion of agent/broker commissions on sales price) to one where the corporate client is billed directly for services rendered. They may be taking a wait and see approach as the market is expected to take time to respond to the new regulations.
We will continue to follow and share our findings on the impact of this settlement on domestic relocation programs, home prices, and the US real estate market.
