For agents in New Hampshire, this week marks two months since PrimeMLS, the state’s multiple listing service, implemented the business practice changes outlined in the National Association of Realtors’ nationwide commission lawsuit settlement agreement.
In these two months, one overwhelming trend has emerged — everyone is handling the changes a bit differently. Brokers from across the state dove into these difference during a panel discussion at the New Hampshire Association of Realtors’ (NHAR) conference on Tuesday in Concord.
“Everyone is adapting and coming up with business models and trying to settle in, and I think we are going to know a lot more about how this is going to really work a year from now,” said Matt Johnson, NHAR’s legal counsel. “So, for now, I would caution patience.”
According to the panelists, the largest discrepancies are occurring in how agents and brokerages are handling buy-side agent commissions now that offers of compensation are no longer allowed to be disclosed on the MLS.
“What we are seeing is kind of two buckets,” said Adam Dean, the broker-owner of Duston Leddy Real Estate. “In one bucket are agents and listings who are not sharing what they are offering for buy-side compensation and are instructing buyers to write all their asks into their offer. In the other are sellers who are choosing to advertise the buyer broker compensation they are offering in all allowable channels.”
While brokers said they are happy to work with sellers who are not disclosing offers of buyer broker compensation, Dean noted that if the listing agreement specifies a certain amount of buyer broker compensation will be offered, the listing agent should disclose that information if asked.
“If you are telling buyer’s agents they can ask for buyer broker compensation in their buyer’s offer, your listing agreement better reflect that,” Dean said. ”If your listing agreement has a number there and you aren’t disclosing it when your seller said you can, then we have an ethical issue.”
Susan Cole, the broker-owner of Susan Cole Realty Group, noted at the end of the day, it is important for agents and brokers to remember that the seller is in the driver’s seat when it comes to how compensation is handled.
“I think, before, a lot of folks looked at it as this is our compensation and we are sharing it, but now we have to remember that that is not the way in which this class-action lawsuit settled itself,” Cole said. “If we are listing agents, we can’t share our compensation unless the seller instructs us to do that. It is a seller decision, not an agent decision.”
Regardless of how agents and their clients are handling compensation in any given transaction, brokers agree that in order to make everything clear for all parties involved, it is best to include how the buyer broker fees are being handled in both the purchase and sales contracts being submitted with an offer.
“If I, as the listing agent, don’t see an ask for buyer broker compensation on the purchase and sale, I am going to assume that you guys have it covered and that my seller doesn’t have to pay or even consider that fee,” NHAR President Joanie McIntire said.
“Maybe you are trying to make your offer more attractive to the seller, so your buyer doesn’t ask for it, the same way they may choose to waive an inspection. But I think it is a lot cleaner to indicate what you and your buyer are doing about your compensation, especially if it is a multiple-offer situation. Because you don’t want to end up at the closing table and realize you and your buyer have not sorted out how you are getting paid.”
Challenges and triumphs
Brokers at the NHAR conference also weighed in on the newly mandated buyer representation agreements. New Hampshire was one of a handful of states that had already required these agreements, but brokers said most agents were not in the habit of getting these forms signed until a client was ready to submit an offer.
For the most part, brokers said buyers are willing to sign these agreements. But Andy Smith, the broker-owner of Badger Peabody & Smith, said about 20% to 25% of prospective buyers are hesitant. Due to this, his firm has created a one-off showing agreement, which agents can use to show a single property to a buyer.
“We did create a showing form for those one-off occasions when someone wants to just see one property, and one of our agents will show someone that one property and not expect a fee for the showing,“ Smith said. “If you want to go any further, then we’ll have to enter into a contract.”
Despite the reluctance of some buyers, Smith feels that this change has been great for his agents.
“I think, at some point, I am going to want to send attorney [Michael] Ketchmark a thank-you note, because my agents are getting much higher fees than when they were compensated by whatever the listing side decided was a fair fee,” Smith said.
“The agents also weren’t talking to buyers before about what they are worth. Across the board, I am seeing higher buyer agency fees coming in, and buyers are happy to pay them because they see and understand the work their agent is doing for them.”
Dean shares a similar view
“Agents are getting better at communicating their value proposition,” he said. “Before, they would just take whatever was given to them, but now they have the opportunity to really describe what they are doing and their value. And we are being forced to have this conversation a lot earlier in the transaction and agents can really use it for their benefit.”
Looking beyond the settlement
Brokers also feel that these changes will help increase the overall level of professionalism in the industry.
“I think some of the things that came out of this are good,” said Maggie Verani, the broker-owner of Berkshire Hathaway HomeServices Verani Realty. “We’ve been skirting the issues for a long time, and now you are either going to be a professional or you are going to get out of this business.”
Although it is still too early to tell what the exact ramifications of the business practice changes will be and which best practices will emerge, real estate professionals in New Hampshire feel things are going fairly smoothly so far.
“I’d like to applaud everybody,” said Chad Jacobson, the CEO of PrimeMLS. “This was a seismic change to the rules, and sure, there have been some outliers, but for the most part we’ve had tremendous compliance with these new rules very quickly.”
Even though it is clear there will be some growing pains as industry players explore different models and ways of doing business, brokers are optimistic about the future.
“I am grateful that we are past that July 15 date and the Aug. 17 date,” Cole said. ”And now we are where the rubber meets the road and everybody is sort of implementing all of the things that we’ve been discussing. And now we can find out what the real questions are.”