May is Commission and Compensation Month here at Inman. We’ll sort through the noise and misinformation and provide you with the most up-to-date facts and strategies about how to prosper in the wake of the commission settlements. And look for straight-to-your inbox updates with Inman’s new weekly digest, Commission Chronicles.
The National Association of Realtors (NAR) proposed settlement to its commission cases will change the way real estate agents do business. The rules of the settlement, which have preliminarily been approved by the Sitzer | Burnett judge and will likely begin going into effect Aug. 17, 2024, will decouple listing and buyer-side commissions, remove commission displays from the MLS and require agents to have contracts with their buyer clients before showing them houses.
This isn’t new information. We have known about the proposed settlement for more than a month now. Unfortunately, we won’t really know how the new rules will affect business or agent pay until after they have been implemented and put into practice for a while.
As a veteran in real estate, I’ve been through lots of ups and downs, disruption and even a pandemic. And the one thing it has taught me is that making plans amid uncertainty is a foolhardy task. Here’s why:
When the pandemic hit, there was no plan
Back in 2020, we didn’t have time to update our business plans before the COVID-19 pandemic started. No one had a blueprint on how to navigate the pandemic or how to stay in business.
On March 13, 2020, the president of the United States declared a national emergency. That was followed by national and local “stay-at-home orders.” In some states, real estate was considered an essential service, and we were allowed to work under a new set of safety rules.
March is a busy month for most real estate agents. I remember the houses we had on the market at the time and talking to clients as we all had to figure out what to do next. Some homeowners did not want anyone in their house, and for a time, open houses were not allowed in many areas.
Some homebuyers stopped their home search while for others, moving became a kind of emergency. In fact, in March of 2020, the number of people who moved spiked.
As real estate companies were forced to close their offices, real estate agents worked from home. For some, that was a new experience; for many, it was not.
Things change quickly
One of my greatest frustrations was the long line at the bank. The lobby was closed, and we could only use the drive-up windows. At the time, the limits on mobile deposits were too low, and wiring money wasn’t as easy as it is now.
The co-working space we were using for an office closed temporarily at first and then permanently. Deliveries are sometimes sent to what is now a vacant building, and some mysterious person signs for them.
Prior to the COVID, we didn’t have any plans for how to address the issues that came up during the pandemic. I didn’t have a plan for how to handle mail, banking or real estate closings that could not be done in person. We learned how to meet with clients over the internet and how to deal with showings in partially closed condo buildings.
We had to learn how to protect ourselves and our families from a potentially deadly virus while earning a living.
We learned how to navigate in a world where everything changed almost overnight. We learned to deal with large amounts of stress and uncertainty. Did anyone have a plan for March of 2020?
Where we are now
Here we are four years later, getting ready for some changes that will affect the way we do business.
When it comes to the commission lawsuits and settlements, the change is huge. We will no longer, according to the proposed settlement, be able to offer buyer agent compensation in the MLS with our listings.
That means that buyer’s agents will have to figure out if the listing agent is paying a commission to the buyer’s agent, if the buyer’s agent will be paid through seller concessions, or if the buyer will have to find another way to pay their agent. Who knows? Maybe buyer agency will die, and buyers will work with listing agents instead.
None of us have a crystal ball; we don’t know what the unintended consequences of the proposed settlement will be. We cannot predict how consumers will respond to changes in how we do business, just like we didn’t know how consumers would respond to the pandemic.
No one predicted that home sales would rise during the pandemic, peak in 2021 and then hit a decade low in 2023.
Many of us thought that home sales would decline in 2020 due to the pandemic and that more Realtors would quit. I know a few who decided to retire, but we now know that the overall number of Realtors increased and likely peaked at 1.5 million; membership dipped below that number for the first time since May 2021 in February.
We should be talking about how buyers’ agents will be paid and working though various scenarios, including what to do if buyers who are under contract refuse to pay because they don’t have the funds.
By this time next year, all of us will be doing things differently than we are today, and the changes won’t all be part of a plan we made ahead of time. There will be new opportunities that we have not yet imagined. There will be winners and losers; some Realtors will quit, and some will start.
The people who thrive post-settlement will be those who are flexible and able to make a new plan — agents and real estate companies with more of a sense of adventure than a sense of entitlement. People with imaginations who are willing to try new things and take a risk or two. They can think outside of the “we are essential and must be paid X amount because we are entitled” box.
We didn’t plan on being on the losing side of the bombshell commission lawsuits, but here we are. Sure, a plan would be nice, but I am not in a hurry to make one.
Teresa Boardman is a Realtor and broker-owner of Boardman Realty in St. Paul, Minnesota. She is also the founder of StPaulRealEstateBlog.com.
