Until recently, it was common practice for the seller of a home to cover all compensation associated with not just their real estate agent, but that of the buyer as well. The amount, usually 5-6%, was disclosed in the multiple listing services (MLS), making the payment structure set and known. However, a lawsuit, claiming National Realtors Association (NAR) was conspiring to inflate agents’ commissions therefore driving up the cost of houses, was settled earlier this year. In August, changes took effect which prevent the publication of a fee structure and require a buyer’s agreement to be signed between buyers and their agents. These new rules, an attempt to prevent brokers from only showing their clients homes with higher fee structures, are creating what is believed to be fairer practice.

How does this play out in reality and what does it mean for buyers and sellers? We asked some of the area’s top real estate experts to share their insights and explain how the decision creates varying changes from agent to agent.

Amanda Botwood, Compass RE

The real estate landscape is shifting with new rules requiring sellers to decide whether, and how much, to pay a buyer’s broker. This change significantly impacts business practices and the transparency of the buying process.

Previously, sellers often covered the buyer’s broker fee, simplifying the transaction for buyers. Now, sellers can contribute nothing, a portion, or the full fee. This variability introduces complexity for both parties. One seller might cover the buyer’s broker fee, while another might not, leading to inconsistent buyer experiences and questions about house pricing—should a home not offering buyer compensation be valued lower than comparable properties that do? I am personally having more in-depth discussions on this topic with sellers at listing appointments.

Due to the new law, buyers must sign a buyer agency agreement with a real estate professional before viewing any properties. Practically, this is causing a lot of confusion for buyers who may not want to sign an agreement, may not understand the legal terms used in the agreement, and are generally mistrustful of signing anything. This means I am having much longer buyer consultations prior to starting the home-buying process with any new buyers. It also means buyers need to plan in advance, and carefully select a buyer’s agent who will represent them as they wish to be represented. At what can be an overwhelming and emotional time, the pressure felt by buyers to sign can be off-putting and overwhelming, to say the least. Additionally, as a real estate agent, I must engage in financial discussions early on, ensuring buyers understand potential, as yet unknown, additional costs, which might involve detailed budgeting sessions. The cessation of disclosure in the MLS about these contributions further complicates matters. Practically, it means I am making a lot more phone calls to other agents in order to understand if any buyer compensation is being offered by the seller, so I can advise my buyer, and the buyer can make informed decisions. Because buyers are left uncertain about the how much they may/may not need to contribute, the process is less transparent, and budgeting is more difficult.

For sellers, it’s crucial to weigh the competitive advantage of covering the buyer’s broker fee. Offering this incentive could make their property more attractive, potentially leading to quicker sales and higher offers. Conversely, sellers who choose not to contribute should be prepared for the possibility that some buyers might be deterred by the additional expense. Educating the seller to understand that offers to purchase may still include a request for the seller to pay the buyer agent compensation – even if the seller hasn’t offered to pay in advance, is another discussion I am now having with sellers.

Ultimately, these new rules emphasize the importance of transparency and communication. By fostering open dialogue, I can guide my clients through these changes, ensuring smoother transactions despite the evolving landscape.

Jud Henderson, Callaway Henderson Sotheby’s International Realty

Back in March, the National Association of Realtors (NAR) agreed to new rules around real estate commissions as part of a lawsuit settlement that took effect nationally on August 17th. The State of New Jersey accelerated the implementation of these rule changes to begin August 1st, so locally we are now more than a month into the new landscape. Depending on who you ask, you may get conflicting predictions about where things are headed from here.

It’s important to establish the rules changes, the primary two of which are: 1) cooperating broker commission amounts (how much, if anything, a seller is willing to pay to a buyer’s agent) cannot be published in the Multiple Listing Service (among other things, the database that agents use primarily for searching available properties), and 2) every buyer looking at homes with agent representation must have a signed buyer’s agency agreement in place. The former is intended to decouple the property search an agent conducts on behalf of their buyer clients from how much compensation is being offered, and the latter is to ensure buyers have a clearer understanding as to how their agent is getting compensated for their representation. It is important to note that sellers can absolutely still opt to pay a buyer’s agent, it simply cannot be advertised in the MLS. Whether sellers choose to continue to do this in the long term remains to be seen. The buyer agency agreement states what the buyer is willing to pay their agent themselves in the event that a seller decides not to pay any cooperating broker compensation (or a lesser amount than what the buyer and their agent agree upon).

Proponents of the rule changes believe that well-informed sellers and buyers may choose to pay an agent only for the services they are providing directly to them. Simply put, the seller will pay for their listing agent, and the buyer will pay for their buyer’s agent. Nearly five weeks in, we are seeing varying examples of how sellers are choosing to proceed; however, a decisive majority is still choosing to incentivize a buyer’s agent by offering cooperating brokerage compensation. As predicted, knowledgeable agents have been presented with a considerable opportunity to leverage their expertise and differentiate their level of service. Those agents are able to have detailed conversations with their seller and buyer clients alike, allowing those clients to make informed decisions for themselves as they enter the real estate marketplace. It’s those agents who are also best able to represent their clients every step of the way through the exciting, yet complicated process of buying or selling a home. It is our belief that our clients benefit from transparency and clarity—and making sure they are fully aware of their options (including that payment is entirely negotiable), is merely a baseline for good service. The advantages of working with a great agent only grow from there. While agents had some initial trepidation about getting the buyer’s agency agreement signed on a consistent basis, the changes have resulted in our agents having these in-depth conversations from the get-go (as designed) and it’s proving to be very helpful for all parties involved.

In the face of these recent industry changes, Callaway Henderson Sotheby’s International Realty represented more buyers and sellers in Princeton during August 2024 than in August 2023, just one quick data point to support the notion that what benefits our clients is good for business.

Ken Verbeyst, Berkshire Hathaway HomeServices Fox & Roach REALTORS

The recent changes as to agent representation and compensation really will not change how I conduct my buyer’s agency business though my company (BHHS Fox & Roach and others) have a new library of forms and required procedures. Pennsylvania, where I am also licensed, already required buyers have agency agreements in place at step one. I routinely have buyers not only agree in writing to my fee structure but also to all letters, ads, phone calls and door knocking I do on their behalf. Prior to entering into this agreement, I also confirm buyers’ ability to make the purchase.

Assisting as a listing (sellers) agent, the new challenge is how to let buyers and their agents know if seller is offering any compensation on that side. Now it’s done privately. My preference is to have seller only express a willingness to consider all terms and then have buyer, their agent or attorney include those terms in the written offer; then we compare all offers, their terms and bottom lines. Changes may occur to address the created confusion of listing agents not being allowed to mention sellers’ willingness to cover both agents’ fees. For example, now buyers’ agents are calling texting or emailing each listing agent to ask if this compensation is offered so buyers can be made aware if they will need to budget for that expense. The old system allowed this to be stated under agent-accessed information and quantified. A far better resolution would have been to merely remove the secretive agent information and post all in public portion.

As to impact, I have seen many discount brokers come and go since getting licensed in the late ‘90s. Knowledge, experience and providing quality service have and will always be of value and rewarded. In the end, no business can function giving away its product or services. I do believe, however, the biggest change of prohibiting the MLS from publishing cooperation amounts privately was wrong and would have been better to make such information required to public so buyers have that knowledge up front. The regulations are new, and perhaps will change again.