A Buyer's Guide To Understanding Broker Commissions After Realtors® Settlement
Following the National Association of Realtors® $418 million settlement to resolve "antitrust claims," the NAR has revised its policies to promote better transparency related to commission structures.
If you are not a Do-It-Yourself (DIY) type and would prefer to use a Realtor® to purchase a Miami condo, you need to be aware of a number of changes before beginning your pursuit of a unit.
Gone are the days of calling a Realtor® and requesting that real estate agent to email you some listings without asking many questions.
Forget about “touring” a condo listing without signing a commission agreement.
Be prepared to be asked by the broker to pay a retainer upfront and understand that the fee may quite possibly not be applied to any future commission.
Another change to be aware of is that many buyers - and not the sellers - will now be on the hook for any commissions earned by their broker in facilitating the transaction of a unit.
Buyers paying broker commissions is one example of the way Florida’s residential real estate industry changed this week with the implementation of rule modifications resulting from the National Association of Realtors® $418 million settlement of “antitrust claims.”
The changes - which are the result of “claims brought on behalf of home sellers related to broker commissions” - went into effect throughout the country on Aug. 17, 2024, for the more than 1.5 million-member organization, according to an NAR statement.
Juana Watkins, the general counsel for the Florida Realtors® association, recorded a nearly 27-minute video to explain the changes. The video was posted July 30, 2024, on YouTube under the account name “Florida Realtors Tube.”
The repercussions are huge in Florida where the statewide association has some 238,000 members. Of that, more than 60,000 members belong to the Miami Association of Realtors® and an additional 42,000 members are part of the Broward, Palm Beaches & St. Lucie Realtors® association.
To provide some clarity about when condo buyers can expect to pay a commission, we are going to let Watkins explain the particulars in her own words in the following seven video clips.
“Heart” Of NAR Settlement
Watch the short clip: https://youtube.com/clip/UgkxrO2WsTyMZwwxt3Z1FH7Tr8TfOu7h84Fo?si=FudN-EFKDJVnSwg6
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“Moving on to paragraph seven, this takes us to the heart of the settlement and how it impacts the agreement,” she said. “The goal of this paragraph is to provide the parties with flexibility in how to structure compensation and to do so in a clear, objectively ascertainable way. “
Compensation Earned
Watch the short clip: https://youtube.com/clip/Ugkx_MR7X3snD-7YRyocQ_39fZjF8h6EF7VZ?si=bRy5kbZFOGJQiaeS
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“We start with how compensation is earned,” she said. “When during the term of the agreement, consumer contracts to acquire real property or defaults on a contract, compensation is earned.”
Services Rendered To Consumers
Watch the short clip: https://youtube.com/clip/Ugkxyt_UQ2wYtre-iX8emPhhk3flrSp09hTG?si=0DWema9x1NQ4wpMP
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“The form then states some pretty critical terms of compensation.
“First, the form clarifies that the compensation here is for services rendered to the consumer. In other words, the compensation outline here is not for listing services on a property the buyer selects that is also listed by the broker.
“Those are services to the seller, not the buyer. ”
Seller Or Listing Broker Agrees To Pay Buyer Broker
Watch the short clip: https://youtube.com/clip/UgkxF8IV6IMYE4tYbHGuXmhiV147A_LyO0kD?si=Tdn2lBZ9SZkUNlEq
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“Another critical issue addressed here is, what happens if the seller or the listing broker agrees to pay this broker for services to this consumer?” she said. “So, for example, for bringing this buyer to a listing. This agreement states that the amount the seller or listing broker agrees to pay will reduce the amount the buyer agrees to pay in paragraph seven.”
Determining Commission Amount
Watch the short clip: https://youtube.com/clip/UgkxGvjZ6U2hTI6n7gg1pc5utYtrbUAGPjs4?si=Z9SMzta_i0JVYTVj
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“So how do they define the amount to pay?” she said. “The parties are able to fill in the blanks to the compensation section based on their agreement.
“It is very important to remember that the parties may elect to fill in multiple options.
“For instance, the parties may complete the purchase and the lease subsections if the buyer is not sure the financing will come through and they may need to lease prior to the purchase of the property.
“It is completely up to them.”
Fees Earned Even If Deal Does Not Transact
Watch the short clip: https://youtube.com/clip/UgkxoUgacYkpW3YaW9f-0kkGShLfntztoEN6?si=o4R8lU_9jhhNfg4g
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“But note that the fee is defined as payable not later than the date of the closing but the fee is earned regardless of the closing,” she said. “If the consumer defaults on the sales contract and never closes, the fee may still be owed to the broker.“
“Maximum Flexibility” For Negotiating Compensation
Watch the short clip: https://youtube.com/clip/Ugkx0cBICXhwEhxN9I7jk2_wNyJAr6vXnABw?si=9zD-I7hLuQqeIdw0
If you don’t want to watch the clip, here is a transcript of Watkins’ statement:
“As you can see, there are many options to structure compensation, and additional space is given for the parties to enter other terms that are unique to their relationship,” she said. “Maximum flexibility for compensation structure between the consumer and the broker has always been our goal, and in this post settlement world, it is more important than ever. “
It is worth noting, this is a link to watch Watkins’ entire presentation regarding buyer-broker agreements following the August 2024 implementation of the NAR settlement.
If you have any additional questions, we suggest you reach out to your attorney or Realtor®.
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