If you have been considering selling a house, you have probably heard about the National Association of REALTORS® (NAR) lawsuit. To make a long story short, NAR was sued by some home sellers claiming that they didn't know they were paying compensation for both their own agent and for the buyer's agent. While we have our own opinions on some of the flaws of that lawsuit, the outcome has definitely caused waves of frustration across the real estate industry - for sellers, buyers and real estate agents on both sides!

Prior to August 17, 2024, the Multiple Listing Service (MLS) rules stated that the listing Broker was required to offer cooperating compensation to the buy side of the transaction in order to even be eligible to be published in the MLS. This meant that every listing in the MLS would show everyone with access how much was being paid to the buyer’s Broker before they even toured the property. When a seller signed a listing with their listing agent, most listing agents would claim that if they wanted “more buyer’s agents to bring potential buyers to view your listing, you need to offer a fair compensation. Otherwise, they will show their buyers the properties that are offering fair compensation”. Sure, some buyer’s agents didn’t bother looking and showed their buyers houses that met their criteria no matter what compensation was offered. This was the epitome of working in the best interest of your client instead of yourself. Unfortunately, there were agents that did look at the compensation when they selected properties for their clients to tour or make offers on.

How the NAR lawsuit changed things...

The most prominent change that came from the lawsuit was that all offers of cooperating compensation are now prohibited from being published in the MLS. Does this mean the seller and/or the listing brokerage are prohibited from offering cooperating compensation? NO! However, many sellers are asking more questions about whether they should be offering compensation. Brokers can publish them on their own website or in marketing materials for their own use. Any website or marketing that would be sent out to other Broker sites is now prohibited. Other agents can also call the listing agent to ask if compensation is being offered.

Where compensation comes from...

So, if compensation can no longer be published in the MLS, where does it get negotiated into the transaction? GREAT question! It is exactly that now – negotiated into the transaction.

Many sellers firmly believe that they are losing money by offering or paying compensation to the buyer’s broker. The funds paid to the seller after all of the seller’s closing costs are paid is called "seller’s net proceeds". Their listing broker explains to them that their compensation is paid through those seller’s net proceeds. In years past, that also included the cooperating broker’s compensation, which that listing broker would then pay to the buyer’s broker after closing. This is one of the reasons that many sellers feel like they should not have to pay the buyer broker. They are asking "Why doesn't the buyer pay their own broker directly?" “Why am I paying for both agents?”

Many buyers just don't have additional cash to pay the buyer’s broker directly. Many first-time home buyers have been saving money for years to finally be able to purchase their first home. Now that they finally have the finds for the down payment and closing cost on their mortgage - this lawsuit changes the way the game is played! Or did it?

Who really pays compensation?

When you look at the question of who is really paying agent compensation - doesn't it really just come down to what side of the ledger you are looking at? Logically speaking, if the buyer doesn't buy the house, then can the seller make any net proceeds from the sale? And if the seller pays their broker through seller net proceeds, how would that happen if the buyer doesn't make the purchase? So, without a buyer, no one gets paid in the transaction! If 100% of the money is coming from the buyer who makes the purchase, then doesn't it stand to reason that it is in fact the buyer who is paying 100% of everything!? Isn't it the buyer who is paying both the buyer’s broker and the seller’s broker?

As a seller, you can actually net more proceeds under these changes! How? Easy! Let buyer’s agents ask for the compensation they are requesting with each offer they submit. You’d be surprised at the variety of compensation requests that will come through. Some agents know their worth and will submit offers accordingly. Others are afraid that their client will lose the opportunity to win the bidding and will literally sell themselves short just to make a sale. Everything in a contract is negotiable, including the compensation! Are they doing a home inspection? Is it a cash offer? If it’s a financing offer, what type of financing? Will additional things be needed from you as the seller over other financing options on the table? Can the buyer close as soon as you need to or give you the extra time that you need to stay in the property? Do you have other requests that one buyer can accommodate over another buyer?

At the end of the day, it ultimately comes down to which offer has the best total terms AND net to seller amount that works for YOU as the seller. Period.