The real estate world is about to face some significant shifts that will impact everyone, from buyers to realtors to investors. These changes, set to take effect on August 17th, are a result of a major lawsuit that’s reshaping how realtors and brokers operate.
As a property manager, I aim to help you navigate these new waters and ensure your investment strategies remain profitable and stable. I had the pleasure of discussing this topic with Tosh Chandy, a realtor and an active member of the Chicago Association of Realtors’ Forms Board. Tosh has a unique perspective, as he has been closely involved in the creation of the new forms we will all soon be using. This blog outlines some of the key changes you should be aware of.
The Lawsuit That Sparked It All
A class-action lawsuit was filed against several brokerages, claiming there was a lack of transparency in how realtors were paid, especially on the buy side. Traditionally, when a listing agent charges a commission, a portion is offered to the buyer's agent. This system, often undisclosed to buyers, has now come under scrutiny.
As part of the settlement, there are two major changes:
Commissions are no longer disclosed on MLS listings. Buyer’s agents won’t automatically see the commission offered when they access MLS property details. This means buyer’s agents will now have to directly contact listing agents to negotiate their compensation.
The introduction of the Buyer Agreement. Every buyer’s agent must now execute a Buyer Agreement with their client, specifying how they will be paid. This agreement outlines whether the buyer will pay the agent or if the compensation will come from the seller.
How These Changes Affect Buyers and Investors
As a buyer, it’s more important than ever to know what you’re signing. The new Buyer Agreement is far more complex than previous forms, and understanding its implications is key. For instance, the agreement may specify that you owe your buyer’s agent a certain commission, regardless of how much the seller is offering.
Investors, in particular, need to be aware of how these changes will affect their strategies. If you frequently work with multiple agents or seek quick property viewings, you’ll now need to navigate agreements with each agent you engage. Additionally, you might encounter situations where you’re required to pay commissions out-of-pocket, especially if you’re not working with a dedicated buyer’s agent.
The Impact on Realtors
For realtors, these changes bring new challenges but also new opportunities. Agents must now be more transparent about their compensation and provide clear value to clients. With the end of automatic commission offers through MLS, realtors will need to negotiate their fees directly, which can open doors for those who are knowledgeable and skilled negotiators.
Furthermore, realtors must now decide how they want to structure their business. With options like charging flat fees, hourly rates, or traditional commission percentages, it’s essential for agents to educate clients on their worth and how they can guide them through the buying process.
What’s Next?
The final judgment for this lawsuit will take place in November 2024, but these changes will be implemented well before then. The Department of Justice has not signaled any significant intervention in the case, so it’s likely that these shifts are here to stay.
Final Thoughts
In the short term, these changes might seem confusing, but with the right knowledge and preparation, buyers, sellers, and investors can still thrive in this evolving market. For realtors, the key will be to adapt to this new level of transparency and find ways to continue providing value to their clients. And for buyers and investors, now is the time to be more involved and informed in the process than ever before.
For more insights on how to navigate these changes, feel free to follow us on Instagram or get in touch with your local realtor. We’re here to help you succeed in this new real estate landscape.
