The Sitzer/Burnett verdict does not prohibit the practice of making offers of cooperating compensation, NAR attorneys said Monday at NAR NXT, The REALTOR® Experience, in Anaheim, Calif. Listing brokers decide how much compensation to offer to serve in their seller’s best interest. This is solely a matter that’s negotiated between brokers and their clients. Following the verdict, real estate professionals should continue having transparent conversations with clients about the services they provide and how they get paid, they added.
NAR Chief Legal Officer Katie Johnson encouraged pros to continue using buyer representation agreements, which provide “an opportunity to have these important conversations with consumers about your value, the services you provide and how you will work in the client’s best interests.” Importantly, she added, pros need to stress the negotiability of their compensation in every single transaction.
“When you’re working with [selling] clients, let them know about their choices when it comes to how the buyer agent will be compensated,” Johnson said. The compensation may be paid through an offer of compensation from the listing agent, by the seller, or the buyer can pay for the services directly, or a combination of these sources. But you should let sellers know how it works in their favor to make an offer of compensation to the buyer’s agent: It makes the home purchase more affordable for buyers, and thus, widens the pool of potential buyers for the property.
Johnson reiterated that compensation is, and always have been, negotiable and that there is no standard or set amount for agent compensation. And NAR doesn’t tell agents what to charge. She said, “You should continue to use your listing and buyer agreements to help clients understand exactly what services and value you are providing; and importantly, how much you charge.”
She said there are three main categories pros should keep in mind when approaching these conversations with clients:
- Choice: Your future marketing plan and conversations with consumers should include what their choices are when it comes to agent compensation.
- Clarity: Make sure your marketing materials, talking points with clients, training and other communication channels make crystal clear the services you provide and what the consumer can expect when choosing to work with you to help navigate them through the complexities of this important and significant financial transaction.
- Opportunity: This is a moment when you can differentiate yourself in your market, improve your real estate practices and think creatively about solutions. “Use this delta as a launch pad for innovation,” Johnson said. “This is a pivotal moment to maximize transparency.”
What’s Next on the Legal Front?
In the meantime, NAR is filing post-trial motions to seek a complete reversal of the Sitzer/Burnett verdict and request a new trial, said Lesley Muchow, the association’s general counsel and vice president of legal affairs and antitrust compliance. If that’s unsuccessful, NAR will advance its appeal to the Eighth Circuit Court of Appeals. “We believe in buyer representation; it’s very important to both buyers and sellers alike,” Muchow said.
NAR Senior Counsel and Director of Legal Affairs Charlie Lee said real estate pros can have a meaningful impact on public discourse around real estate compensation and urged members to “help us in the court of public opinion.”
“Continue to combat misinformation and feed the public true information they can rely on,” he said. That includes:
- The purpose of the MLS compensation rule is to let real estate pros know how much they could be paid before they endeavor to do the work on a transaction. “The cooperating broker has the right to know the compensation they could earn if they’re successful,” Lee said. “You have the right to know what it is you’re working toward.”
- Compensation is a matter of negotiation between the agent and the client.
- Because compensation is negotiable, agent commissions are reflective of market-driven pricing.
- NAR’s policies prohibit associations and MLSs from setting, suggesting or recommending any compensation amount.
- There could be fair housing implications if buyers were forced to pay out of pocket for their agent’s fee because it would hurt first-time and low-income buyers the most.
“Everything you do contributes to a vibrant marketplace,” Lee said. “We encourage you to continue focusing on your clients and serving them well.”