Navigating Recent Changes to Buyer Agent Commissions: Best Practices for Agents

Over the last couple of months, real estate practices have undergone significant changes due to recent NAR settlement guidelines. To comply with these changes, new systems and best practices are necessary to streamline your process and avoid costly mistakes. This article will focus on the updated practices regarding the confirmation of the buyer agent commission, if any, when showing and offering on a listing.

1. Buyer Agent Commission is No Longer Stated in the MLS

If you were unaware of this change, you might need more background than this article can provide. However, here are some steps to take to ensure accuracy when handling buyer agent commissions for each showing and offer.

2. Confirm the Buyer Agent Commission Before Showing

Before showing a listing represented by another agent, confirm whether a buyer agent commission is being offered and, if so, how much. You can do this by contacting the listing agent directly via text, phone, or email.

For Listing Agents: Please respond to these inquiries promptly to ensure smooth communication.

3. Communicate Commission Details with Your Buyer

If the buyer agent commission (or lack thereof) means your buyer will need to pay part or all of your commission at settlement, communicate this clearly to your buyer before touring the home. Transparency is key to avoiding surprises later in the process.

4. Consider a Cooperating Broker Compensation Agreement (CBC)

Some buyer agents prefer to have a CBC signed before showing a listing. Doing so can help avoid delays when submitting an offer, as the commission terms are already agreed upon.

A Tip for Buyer Agents: If you want a CBC, prepare the document yourself and send it electronically to the listing agent for an easy click-to-sign.

For Listing Agents: You likely don’t want to stop everything to draft this document, but signing one that's prepared and sent to you should be quick and easy.

5. Submitting an Offer? Ensure the CBC is Signed First

If your buyer decides to write an offer, make sure the CBC is signed by the listing agent before submitting the offer. This explicitly confirms the buyer agent commission being offered and protects both you and your client.

6. Do Not Duplicate the Commission in the Agreement of Sale (AOS)

This is crucial: If you have a signed CBC that confirms your buyer agent commission, do not include the commission again in Section 3(A) of the Agreement of Sale. Adding it here would imply you are asking for both amounts—what’s in the CBC and what’s in the AOS.

7. How to Use Section 3(A) of the AOS

You should only use Section 3(A) of the AOS to request a seller to cover some or all of your buyer agent commission if the listing agent is offering none or only part of the commission. For example:

•   If no commission is offered by the listing agent, you can request the seller to pay your buyer agent commission.

•   If only part of the commission is offered, you can request the balance in Section 3(A).

8. Ensure Compliance with Your Exclusive Buyer Agency Contract

Remember, you cannot receive more commission than what is stated in your Exclusive Buyer Agency Contract (BAC).

9. Listings from Your Brokerage

If you’re submitting an offer for a listing held by an agent within your brokerage, do not use a CBC, as this would not involve a cooperating broker. Instead, check with your broker for the correct documentation procedure in this situation.

10. When in Doubt, Get a Second Opinion

If you're ever unsure, it's always a good idea to have your broker, manager, or team leader review your documents before submitting them. This can help you catch any errors and ensure that everything is compliant.

 -Copyright © The ABCs of the CBC and AOS, Lisa Naples, Berkshire Hathaway HomeServices Homesale Realty. 2024. All Rights Reserved.

Facts, opinions and information expressed in the Blog represent the work of the author and are believed to be accurate, but are not guaranteed. The Lancaster County Association of Realtors is not liable for any potential errors, omissions or outdated information. If errors are noted within a post, please notify the Association. Posts represent the author's opinion and are not necessarily the opinion of the Association.