Important Real Estate Industry Update: Navigating Broker Compensation Changes

I want to update my clients—both homebuyers and home sellers—on significant, industry-wide changes related to real estate brokerage practices and broker compensation, effective August 17, 2024.

My name is Kevin Baum, and as a REALTOR® with @properties Christie's International Real Estate Barrington, my team and I have been preparing for months. We are ready to guide you through this process to ensure your next transaction in the Barrington area is seamless and successful.

These industry changes are the result of the recent NAR litigation settlement and are mandatory across the industry. They are intended to create greater transparency and reinforce the idea that real estate broker compensation is always negotiable and never fixed by law.

A Note on Transparency and Consultation

This shift represents a significant change in how agent compensation is handled and discussed. If you are currently working with any agent who has not yet explained these major industry changes to you, I strongly encourage you to ask them to do so immediately, as all agents and brokerages must comply with these new rules.

When we meet for a consultation, I will personally ensure that you are fully informed and completely comfortable with all the changes, including the new industry-wide rules for buyer agreements and compensation negotiations, before we move forward.

Key Changes Affecting Homebuyers and Sellers

1. Mandatory Buyer Brokerage Agreements (For Homebuyers)

Effective August 17, 2024, if any broker or REALTOR® is representing you as a homebuyer, they are required to enter into a written Buyer Brokerage Agreement before showing you properties.

• What it does: This mandatory agreement protects both buyer and broker. It clearly outlines the services your agent will provide and specifies the mutually agreed-upon compensation for those services.

• Compensation: The agreement ensures the agent cannot be paid more than the amount you and they specify, establishing clear and upfront compensation terms for your home purchase.

2. Changes to Buyer Broker Compensation and the MLS

Another significant change affects how buyer-broker compensation is determined and advertised across all real estate listings.

• Seller Direction Removed: Home sellers will no longer direct the amount of compensation paid to a buyer's broker; that amount will now be determined by the Buyer Brokerage Agreement between the homebuyer and their representative.

• MLS Advertising: As a result, offers of buyer-broker compensation will no longer be advertised in the Multiple Listing Service (MLS) by any listing broker.

3. New Options for Compensating Buyer Brokers

While sellers are not required to pay the buyer's broker, they still have the option to do so. Compensation may be handled in one of the following ways:

• Paid by the Seller: Through the proceeds of the transaction, and included in the purchase price of the home. (Sellers: This option generally helps to expand your pool of potential Barrington homebuyers.)

• Paid Directly by the Buyer: As agreed upon in the Buyer Brokerage Agreement.

• Paid by Both Parties: As determined through mutual negotiation during the sale process.

Working with Kevin Baum in Barrington

• If you are a Seller: Because the vast majority of homebuyers work with a broker, it is likely you will receive offers that include a request to fund some or all of the buyer-broker’s compensation. As your fiduciary and @properties Barrington broker, I will help you carefully evaluate every offer and review different compensation scenarios to achieve the best possible outcome for the sale of your home.

• If you are a Buyer: We will finalize our Buyer Brokerage Agreement early in the process, giving you transparency and clarity on the cost of my professional representation from the start.

My Core Commitment as Your Real Estate Broker Remains Unchanged:

While some paperwork and procedures have evolved, my commitment to you is unwavering. I am here to provide expert real estate services in the Barrington area, and will always:

• Faithfully represent your best interests every step of the way.

• Help you find and buy, or market and sell, the home you love.

• Negotiate and secure the most favorable terms for you.

• Be your trusted resource for all things real estate during this engagement and well beyond.

Thank you for your trust and business. I look forward to working with you!