Effective August 1, 2024, new nationwide commission rules that the National Association of Realtors (NAR), Arizona Regional MLS (ARMLS), and our brokerage (Launch Powered By Compass) have been implemented as a condition of the National Association of Realtors’ commission lawsuit settlement. All states must comply by August 17, 2024.
The previous method was a Buyer engaged in a handshake deal with a Buyer’s Agent, who would then show the buyer homes for sale. The Buyer would bring the funds to closing, and commissions paid to the Buyer’s brokerage and the Seller’s brokerage were paid from the Seller’s proceeds at close of escrow, at a number or percentage that was disclosed in the MLS and agreed to in the Seller’s listing agreement with the Seller’s brokerage.
The new method in effect is three-fold:
1. Compensation to the Buyer’s Agent has been removed from the MLS.
a. Compensation may be communicated from the listing agent to the buyer’s agent via a phone call, text message, etc. or any other outside method of communication including ads, social media, and sign riders.
b. Compensation can be posted on a website “two clicks” away from the URL. Ex: 123mainstreet.com, then one more click to reveal.
2. Buyers and Buyer’s Agents will now execute an employment agreement that specifies what the Buyer’s Agent is to be paid on a transaction.
a. This number can be any mutually agreed upon percentage or a flat rate and for any agreed-upon length of time. One of the agreements below must be signed before showing any homes.
b. This agreement can be exclusive (meaning no matter what a buyer buys, with the agent or without, the agent will be entitled to the specified compensation). This form is the Buyer-Broker Exclusive Employment Agreement (click here for a sample).
c. A limited agreement is also available for buyers working with any number of agents (the agent who consummates the transaction for that buyer will be compensated). This is the Buyer-Broker Agreement to Show Property (click here for a sample).
d. If a Buyer is unrepresented, and goes directly to the Listing Agent to view a property and submits an offer directly to the Seller, the form used is the Unrepresented Buyer Disclosure (click here for a sample).
3. Agents will be paid by the seller, the buyer, or a combination of both.
a. Sellers may offer no compensation, a percentage, or a flat rate, and may consider a compensation offer when negotiating a purchase contract.
b. When the Seller offers compensation, the form used is the Compensation Agreement Between Brokers (click here for a sample). This form is sent by the Listing Agent to the Buyer’s Agent before submission of an offer. The Buyer does not sign this.
c. If the Seller is not offering compensation, or is reviewing offers of compensation, the form used is the Seller Compensation Addendum (click here for a sample).
d. If the total commission amount offered to the Buyer’s Agent, negotiated with the Seller, or a combination of both is lower than the amount specified in the Buyer-Broker Employment Agreement, the Buyer will be responsible for the difference.
e. If the amount offered by the Seller is higher than the amount specified in the employment agreement, the Buyer is entitled to the difference.
Notable:
Section 8f of the purchase agreement makes payment to the Buyer’s Agent (either from the Seller, Buyer, or combination of both) as a condition of closing.
Commissions are separate from Seller concessions to the Buyer. Transactions with both commissions and closing costs must be written as separate fees for conventional and FHA financing.
Open house guests do not need to sign any agreement to enter an open house.