The Start Line of Real Estate's New Normal

Hello current clients, past clients, peeps I know, and everyone in between!

We are on the eve of a change in the real estate industry here in Wisconsin and I want to take a moment to update you on what is about to become.

Before I delve in too deep, please know that I am sharing as much as has been shared with me by the National Association of Realtors (NAR), Wisconsin Realtors Association (WRA) and our local Multiple Listing Service (MLS)…along with adding in my own anecdotes and interpretation. 

I’m going to start from my beginning, but also…I’ll try to keep it to the point, and engaging. ;)

I’ve been selling real estate for nearly 20 years, and this entire time our MLS has acted as a form of cooperation between brokerages. It’s been an agreement that as a member, when a Broker has a listing, they will share their listing on MLS as a way to employ all other Brokers & Agents to help them sell this listing. There would be desire to do so by sharing the Listing Broker’s compensation with the Buy side brokerage. It would be clear as day as to how much the listing brokerage is offering.

Just like any company, in any business, each brokerage has always been allowed to charge their own amount that they see fit.

The compensation in MLS has made the process transparent. And it truly has worked to compensate agents to show properties to their current buyers & prospective buyers.

For instance, when I first started in this industry I worked with my aunt. She had a listing in WFB on Bay Ridge. We had a random Buyer reach out to see the property, and I met the random Buyer at the house. That house was not for that Buyer, however I was aware of a home down the street for sale and suggested we go see that one. I was aware that my *brokerages minimum compensation requirement was being offered by the listing brokerage, so the incentive to show the property was there. And guess what? They bought that home.

(*Again, all brokerages can set their own fee requirements. At the time, I was at a nationwide brokerage)

Fast forward to 2019, and there were some Sellers in Missouri who felt they were wronged & forced to pay the fees they agreed to. They created a class action lawsuit, which found it’s way to the DOJ. The DOJ & the NAR settled and in March of this year the NAR pushed out new standards that are to be applied by no later then August 17th, 2024. Our local MLS will start these standards tomorrow, August 15th, 2024, they are…

1. Offers of compensation between brokerages are no longer allowed to be displayed in MLS
2. ANY Buyer seeing a property with an agent will need to have one of the following three documents signed
1. Pre-agency agreement: this document allows an agent to open the door to a property for a Buyer and walk them through the property. In pre-agency the agent is not to give any advice or opinions to the Buyer. The agent’s brokerage can charge a dollar amount per showing, an hourly rate, nothing, etc. 
2. Buyer Agency agreement: this is the document that probably 98% of all my clients throughout the years has signed with me. It creates a fiduciary responsibility on my end to work in the Buyers best interest, regardless. (Provided I am being fair to all parties in a transaction). In this document, we have always stated what the fee is that my brokerage is to be paid. While this document creates a promise by the Buyer to pay the brokerage, it also states that the Seller or Seller’s Broker can pay towards that fee. So this is why almost never have my clients had to pay out of their own pocket for my services when they purchased. Ultimately it has come from the proceeds at close, as a result of the Buyer paying for the home.
3. Customer Disclosure: In the event that someone does not want to have a client relationship, this is the customer doc that needs to be singed.

Note: in order to write an offer, an agent will need Buyer to eventually sign either #2 or #3. An agent cannot draft an offer for a Buyer with only a pre-agency agreement.

Other note: I believe our MLS will be auditing brokerages on this. If we are found to be out of compliance, sounds like it will be a $1,000 fine.

So again an agent CANNOT open a door for you without one of these three docs being signed, unless…of course there is an unless…

1. The agent hosting the open house is the listing agent (I don’t have full clarity on if it is specifically the listing agent, or an agent from the brokerage, or an agent on someones team).
2. The listing agent is showing a Buyer directly during a private showing.

I feel as though our WRA & MLS is leaving a lot of the new “how to” in a very grey manner. They do not seem to want to say that they are encouraging any type of “standard of practice” as to how listing brokerages & sellers can or should offer incentive to members of MLS.

So what’s going to happen? Great question friends!

Only time will tell, but there are some new steps that I’ll be taking for my clients. And it’ll be a learning curve.

1. Brokerages CAN still offer up to share their commission with other agents at other brokerages. We just CANNOT share the info in MLS. We can however, share the info in an email, text, on sign riders, on our own brokerage websites…just NOT on MLS.
1. If a brokerage is offering up compensation to another brokerage, we have extra paperwork on our end, between brokers. It is called a “Compensation Agreement”. For EVERY Buyer that a Buyer Agent has for a property, they will need to sign this document with the Listing Broker. (This document needs to be signed by an “authorized” person, at my brokerage that will only be me…the broker.)
2. It’s possible that there will be Sellers/Listing Brokers out there that will not be offering up any type of offer of compensation from the get go. That doesn’t mean it’s not available to ask for in an offer to purchase. Our new Offer to Purchase agreement has a section where you can ask the Seller to pay for the Buyer Agent fee. I can see some people going this route, as they may wonder if all Buyer Agents charge the same amount. Or maybe they really don't want proceeds deducted to compensate the agent on the other end. 
3. Some Sellers might start to offer up concessions in a percentage amount. Here is the “work around” that I think some people are coming up with, as concessions CAN be shared in MLS. (I.e. Seller is offering X% concession to Buyer). Clever, but, eh...if one brokerage is suggesting that ALL their agents do this...ehhh. 

For anyone who has sat through my Buyer Agency consultations, you may remember me sharing the MLS screen and saying…”every once in a blue moon we see a Seller offering $1, I hope you can appreciate that I don’t work for $1, and in that instance you would likely have to pay the remainder of the Buyer Agency fee. But I’ll make sure to let you know ahead of time so you can understand what the financial side looks like.”

Ultimately, it’s going to be up to each Seller & their agent/broker of what they decide to do/offer. Just like it is up to each Buyer to decide if they want to see a home or not.

So, here we are at the start line of a new world of how we do business. I think there will be some bumps, but I feel that in just a short amount of time we will figure out our new normal.

If you want to discuss further, I’m totally down, as you know I love to Talk Shop.

Here we go,

Katie