For many consumers, the two transactions they dread most are purchasing a car and a home.
In both cases, it usually involves financing and not knowing exactly what the car or home will cost when starting the process.
In the U.S., consumer model negotiation is not part of the transaction. A $100 pair of shoes cost $100. There is no negotiating with a hairdresser over the cost of services provided.
In 2024, consumers were given a better chance of knowing what it would cost to use a real estate agent.
The changes came about because of a federal court ruling in November that resulted in a more than $980 million settlement in an antitrust lawsuit against the National Association of Realtors, HomeServices, Keller Williams and other firms that allegedly unfairly overcharged clients.
In the past, the seller usually paid for both real estate agents in a transaction. Knowing this, the price of the house was often inflated to cover the costs. The commission ranged from 1% to usually 6% to be split between the agents.
The primary changes are:
• Realtors must meet with prospective clients to explain how the transaction will work, their responsibilities and what it will cost.
• Before any homes can be shown to a buyer, there must be a contract explaining services to be provided, the length of the contract and what it will cost the customer if a transaction is finalized.
• Realtors no longer can look up what commissions are being paid by the seller.
The preliminary court ruling in April was a major change in the way the Florida real estate community had conducted business.
“We don’t like to learn new tricks. Everyone’s afraid of change. How many of us held on to our BlackBerry way too long before we finally got rid of it?” said Tiea Vincent, owner of NXT Level Realty.
“There are agents that are starting today and they won’t know a life (before the changes) and they will still be doing business and they will be functioning just fine. It’s the ones that have been around, like me, for 20 years. We’ve never done this before. We don’t like change.”
Preparing for the changes took several tacks.
At Berkshire Hathaway HomeServices Florida Network Realty, President Ann King offered her 500 real estate associates a comprehensive, two-week seminar on how the changes will work.
Every step of a transaction was covered. Every question was answered.
In the past, Florida real estate agents worked as transaction agents. The agents would bring the two parties to the table and agree on sales terms.
The goal of those representing the buyer and the seller was to do everything possible to make sure a transaction was successful.
The new system is a single agent system where the seller’s agent is concerned with serving the best interests of the selling client and the buyer’s agent is concerned with serving the best interests of the buying client.
King’s company had the advantage that it had long worked under the single agent model. However, the changes meant that her agents no longer could look up what their compensation would be prior to a sale.
“So we were lucky in the beginning, because they understood that now we just needed to refine the dialogue,” King said.
“We really never talked commission before with a buyer. We needed to prepare our buyers that they might have to pay our fee and sign this agreement.”
The new rules have changed the information real estate agents have about commissions.
In the past, they would consult the Multiple Listing Service, known as MLS, to find available properties. The listing would not only give details about the property, but reveal whether the seller was paying all of the real estate agent fees as well.
Agents representing buyers may not have shown a house if compensation was not guaranteed by the seller. This was known as “steering.”
Memory Hopkins of Memory Hopkins Real Estate began her career in Syracuse, New York. There, the client-agent disclosure conversation and contract had long been how business was conducted. The 42-year real estate veteran came to Florida in 2005 and adjusted to a new way of doing business.
Traditionally the seller paid for the services of both real estate agents; now the costs can be divided between the two parties. But there are reasons to put the onus on the seller.
“When a buyer is purchasing property, I don’t know, maybe 80% of the time they’re financing, and they bring in a lot of money to the table,” Hopkins said.
“They’ve got a down payment, closing costs, bank fees, so to then add the buyer’s broker’s real estate fee on top and sometimes it made it onerous for the buyer,” Hopkins said.
“As a convenience to the transaction, we would ask the seller to pay the buyer’s side. They didn’t have to, but usually it was agreeable. You know, without a buyer, you don’t have a transaction anyway, and nobody gets paid.”
Vincent is finding that sellers are still apt to pay all real estate agent costs.
“I took a buyer out a couple of weeks ago. We went to six homes. And prior to showing them the six homes, I called all six agents. All six agents let me know that the seller was offering compensation,” she said.
A new rule that confused clients and real estate agents alike is the need for a contract before a home search can begin. The contract does not bind the customer to the agent for the life of the home search.
The contract can stipulate that the agreement to work together is for a day, a week, a month or longer. It can be so specific that the contract could be written to pertain to one single address.
If time on the contract expires, another can be written to continue the customer-Realtor relationship.
The rules may be challenging Realtors to develop a new skill set, Vincent said.
“It’s requiring agents to step up their negotiation game. You now have to sell your value. Why should you be paid this commission? What are you going to do to earn it? So now you have to sell your value, and you have to learn to negotiate,” Vincent said.
“And I would dare to say that if you have an agent who can’t negotiate their own commission, are they going to be the agent that’s going to negotiate for you on the price? So it’s really causing the agents to step up their game and become better at their profession.”
The initial complaints from agents may have been for naught, said Andrew Bell, co-owner of Next Home Endless Summer Realty.
“Until we sit down with the customer and have that conversation, don’t work yourself up over it,” Bell said.
“The biggest comment that we got from our agents, as they started to do it, was that it wasn’t a big deal at all. That went easy.”