Buyers, are You Prepared to Pay Your own Broker
By Jim Palmer Jr.

Recently the NAR (National Association of Realtors) agreed to settle a class action lawsuit that will likely fundamentally change the traditional pay structure for Brokers.  Once this settlement agreement gets ratified by the judge, listing Realtors® will no longer be allowed to publish a cooperating broker compensation amount in the MLS (Multiple Listing Service).  That prohibition will not prevent sellers from paying buyers broker fees, but will certainly retard the existing practice enough that most buyers will either pay their own broker or proactively negotiate that fee with willing sellers.  How will they know who the willing sellers are?

Consumer pressure has historically gravitated towards a pay structure where the sellers chose to pay the compensation for the buyer’s broker.  That practice served two purposes, one that benefits buyers and one that benefits sellers;  1) Buyers rarely have enough extra money to pay their own broker fees. Listing prices typically included that fee which seller paid from their proceeds. The net effect is that the buyer pays that fee anyway because it’s included in the price they paid for the property.  2) When sellers agree to pay buyer broker fees (and could publish that in the MLS), buyers were incentivized to look at those properties where sellers agreed to pay the buyer broker compensation.

In the lawsuit, NAR was accused of setting certain fee structures (who pays and how much) for MLS’s that subscribe to that association, which is absolutely false.  NAR has never dictated or ever suggested any sort of commission structure or value range.  That has always been negotiable with consumers on a case-by-case basis.  Consumer desire over a long period of time is what has settled broker commissions into an “acceptable” compensation range.  That is, a range acceptable to consumers or what they are willing to pay.  If buyers didn’t like how much a broker charged for services, they would always go down the street to a different broker who would do it for less.

Another side to that coin is that individual brokers also need a certain compensation range to make a commission structure work for them too. The traditional method of paying brokers only when a property sells costs consumers more than compensating brokers regularly for time worked, expenditures when they happen, and for having the advantage of tapping into expertise.  But, paying on demand has not been the desirable practice for consumers because they rarely have funds available to pay their broker when they receive an invoice.

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