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With the deadline for implementation of new rules set down by the National Association of Realtors’ settlement rapidly approaching, the practice of residential real estate sales as we have known it will be changing.
Although we can hope that the long-term result will be the same — after all, our goal has always been to help sellers sell and buyers buy — it is going to be a lot more complicated and will require a ton more paperwork and effort to achieve the same result.
Consequently, as a team, we are actively gearing up for the significant changes that will become the new reality in a few short weeks. Here are eight key things we are focusing on to prepare.
Ahead of Aug. 17, we are:
1. Finetuning our value proposition
Because we will now be required to have all our buyers sign a buyer-broker agreement that includes agent compensation, and because we had better be prepared to demonstrate our value, we have dramatically upgraded our value proposition and accompanying documentation. We are training our team members to be fully conversant with our new dialogue and collateral.
2. Upgrading our buyer consultations
We have improved our buyer consultation process. To begin, we are making comprehensive buyer consultations mandatory for all our prospective clients. By instituting a detailed process and then extensively training our team members on the use of our new tools, we are striving to fully educate our buyers, all the while reducing the chances of misinterpretation or error.
3. Going through extensive training in the new forms
This has not been easy, especially in California, where the forms seem to be changing weekly. California Association of Realtors (CAR) released a boatload full of new forms and then, mere days later, pulled them back due to accusations from the Consumer Federation of America and the threat of Department of Justice (DOJ) intervention.
Many of the forms were rewritten and then, the very day they were re-released, the DOJ announced it was formally investigating C.A.R. We are holding our breaths, hoping this will not require even more changes to our forms before Aug. 17.
Additionally, the window is tightening, as some of the MLSs in our region are launching the new rules early to ensure full compliance before the deadline.
For example, though our team has always used a proprietary buyer agreement form, now we will be required, along with all other members of C.A.R., to use the agreement provided by the association. This is a very complicated form with many potentially different outcomes, so we are doubling down on the training for this specific form to ensure everyone on the team knows all of the options inside out.
As many of the other basic forms (listing agreements) have significantly changed, effective training is critical. Training is coming from a number of sources, including team sessions, our brokerage, legal counsel, our state Association of Realtors and our local MLS.
4. Expanding our script practices
As the team leader, I am not willing to have anyone on our team “winging it.” Therefore, faced with such monumental changes in not only our rules but also the forms we use and the business practices we will need to employ going forward, we have upped the ante for script practices that specifically deal with the upcoming changes. We begin each day with a team “Power Up” that includes script practice.
5. Providing training to ensure our team members avoid steering
Due to the possibility of unintentional steering in the new realities, we are doing a deep dive to fully understand what steering is and is not, both on the buying side and the listing side. The fear has been that buyer’s agents will start steering clients away from homes that do not offer compensation.
While the hope is that the new practices, including buyer-broker agreements, will remove this possibility, human nature being what it is, there’s still the possibility that some agents, afraid they may lose clients if they require their buyers to pay their compensation, will seek ways to minimize this risk.
There are also potential problems on the listing side.
Historically, we’ve explained commissions by saying, “Here is the entire commission we charge, and out of this, we will be giving the buyer’s agent ‘x percentage.’”
If there were ever any pushback on what was being offered to the buyer’s agent, some agents would say, “You want to make sure to provide a full commission to the buyer’s agent to incentivize them to show your property.” Unfortunately, that is steering the sellers, and it’s a violation of the Realtor Code of Ethics.
Instead, conversations with sellers should center around doing what they need to do to ensure there will be competent professional representation on the other side of the table.
6. Locking down some new communication protocols
To prevent the possibility of being accused of steering buyers away from listings that provide income that is not commensurate with the agreed-upon amounts in our buyer-broker agreements, we are instituting rigid communication protocols to ensure we are in full compliance with the law. This means we will need to have detailed communication logs for each buyer to ensure we can verify how each potential property was handled.
7. Launching a method of communicating levels of cooperative commissions
Because we can no longer list cooperative compensation on the MLS, we are working with our brokerage to establish an effective way of communicating with buyer agents. Because no universal methodology exists as of yet, we recommend that every team collaborate with their brokerage to establish a method that works in their market.
In addition to this, we are making the assumption that any buyer’s agent — in cooperation and agreement with the buyer (based on the buyer-broker agreements they have with their clients) can ask for any pre-determined level of compensation when they write an offer on any listing, regardless of what a seller may state they are or are not offering.
8. Doubling down on open houses
Currently, the new laws allow for an agent representing the seller to hold an open house on the seller’s behalf. Under this arrangement, no open house agent would be considered to be representing a buyer who is merely visiting the open house. C.A.R. has introduced a form for buyers to sign when attending an open house that specifically states that the agent providing the open house is not entering into an agency agreement with the visitor.
Because a buyer-broker agreement will not be required for a buyer to visit an open house, we are assuming that some buyers, unwilling to commit to a dedicated agent’s buyer-broker agreement, will utilize open houses to shortlist potential homes. We believe that this will mean an increase in visitors who have not signed agreements with any specific agent.
Consequently, we are enhancing our open house training so our agents can utilize these opportunities to build their businesses should a visiting buyer ask the attending agent for a representative relationship. In the event that happens, C.A.R. has issued another version of a limited buyer-broker agreement that can be filled out and signed on the spot.
As we begin to morph into the new reality, I am sure there will be many unanticipated issues along the way. To help pave the way and make the journey as smooth as possible, we recommend you and your team take a serious look at each of the issues above and respond accordingly.
Carl Medford is the CEO of The Medford Team.
