Broker commissions on real estate transactions will look a lot different starting August 17

Staff Report

Major changes to how real estate transactions are conducted are set to take affect this month that will affect how both sellers, and buyers, compensate their agents.

On March 15, the National Association of Realtors (NAR) settled a lawsuit brought by home sellers regarding how broker commissions were handled. As a result of that settlement, the NAR will remove agent compensation amounts from Multiple Listing Services, provide detailed compensation information to buyers and sellers and attain a written agreement outlining that compensation structure.

The new commission rules are set to take affect August 17. The settlement included changes aimed at providing consumers with more control over their transactions, and the services and representation they receive.

The most significant changes will come for buyers, since commissions will no longer automatically be paid by the party listing the property.

Real estate agents will now be required to enter into a ‘buyer-broker agreement’ with any prospective buyers. Both parties must discuss their Realtor’s detailed compensation structure and agree to the terms in writing. This must be completed before even a home tour can take place, whether in-person or virtual, or any purchase discussions. Individual brokerages will be able to draft their own agreement, or use the agreements provided by Kentucky Realtors.

Buyers will still be able to attend open houses without an agreement to view homes, but will be required to have a buyer-broker agreement to begin purchase discussions or to view the home privately.

Pam Featherstone, president of Kentucky Realtors, said the changes offer greater transparency, and will offer agents enable Realtors to show what they bring to the table.

“While these practice changes will take time for both realtors and consumers to get used to, we’re confident they will bring clarity to the real estate transaction process and allow realtors to better demonstrate their value,” she said

Buyers are encouraged to review the new agreements carefully. Kentucky Realtors outlined key factors for buyers to consider when discussing a transaction with a licensed agent:

Compensation : How will your Realtors be paid? (amount, structure, etc.)

Scope : How will the Realtors support you in your transaction? What services will be provided?

Timeline : How long will this professional support you in your home search?

When selling a home, consumers will now be required to determine compensation for both their agent to sell their home and possibly the buyer’s agent, called cooperative compensation.

Through cooperative compensation, sellers will choose whether or not to add compensation for a buyers agent to the commissions structure in an effort to facilitate a faster sale, or to have that cost solely covered by the buyer.

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