There never was a standard 6 percent commission. Numerous headlines from major news outlets have created confusion about lawsuits and settlements related to a “standard commission rate.” There is no set commission rate; commission agreements with a real estate broker have always and will always be negotiable and can be paid by the seller, buyer, or a combination. In addition, many agents adjust their commission during the transaction if needed to help bridge negotiations and inspection issues.
A few weeks ago, the National Association of REALTORS (NAR) announced it reached a settlement to a portion of class action lawsuits regarding commissions paid to buyers’ agents by sellers. In the settlement, NAR admitted to no wrongdoing, agreed to pay a financial sum, and agreed to change some current Multiple Listing Service (MLS) rules regarding offers of compensation to a buyer’s agent. The settlement terms still need to be approved by the court, which is expected in early May, and potential changes to MLS rules will occur in July.
Currently, when a seller uses a REALTOR to sell their home, they sign a listing agreement. The agreement includes the negotiated commission and/or fees paid when the property sells. It also stipulates how much of the commission will be split with a cooperating agent representing a buyer of a property. The listing agent enters the property data in the MLS system, and the information is disseminated to other agents and distributed to broker websites and listing portals such as realtor.com.
This way of doing business created a transparent marketplace where buyers and sellers have representation during a real estate transaction. This process was especially beneficial to first-time homebuyers navigating their first home purchase.
Prior to the settlement, agents have been able to view compensation offered by the listing brokerage to the selling brokerage in the MLS system. Part of the settlement will remove that ability, so listing brokers will have a more difficult time communicating the offer of compensation to a buyer’s agent for bringing a buyer.
Another rule change coming from the settlement will require all REALTORS to use Buyer Agency Agreements. Buyer’s Agency Agreements are used between a buyer of a property and their agent and outline the terms of the representation and fiduciary obligations to the buyer. A Buyer’s Agreement also includes the negotiated commission amount the buyer will pay their agent if the compensation isn’t paid by the seller in a transaction. Written Buyer’s Agency Agreements are already required under Missouri License Law and must be signed by a buyer before their REALTOR can provide any advice. Prior to signing a Buyer’s Agreement, the Buyer’s Agent is technically representing the seller under Missouri License Law.
The process of buying and selling a home has evolved for over 100 years and will continue to do so with the announced settlement. Due to the complexity of real estate transactions, 89 percent of buyers and sellers used a real estate professional to help guide them through the process in 2023. Even with the potential changes coming from the lawsuits, the same will continue, and the MLS will still provide a transparent marketplace for buyers and sellers.
Brian Toohey is the chief executive officer for the Columbia Board of REALTORS.
