Real estate professionals are discussing NAR's buyer-broker pay resolution. Brokers and agents face major residential real estate settlement changes. Businesspeople in the community should be educated to understand the settlement regarding residential and commercial transactions.
Commercial agents have historically offered upfront compensation and demanded written confirmation. We ask about compensation after “Is the property still available? We set a matter-of-fact tone as well. Does the settlement matter to commercial then? The settlement applies to NAR institutes, organizations, and councils, including affiliates CCIM, and SIOR. All settlement rules apply to residential transactions by these organizations' members. The settlement does not apply to commercial transactions.
Sitzer-Burnett and the proposed settlement is for residential real estate only. Duplexes, triplexes, and quadplexes may be considered residential depending on the state; follow settlement processes on these to be safe.
Many markets offer commercial real estate on commercial listing platforms instead of MLSs. The settlement's MLS compensation removal regulations won't affect commercial listings on other platforms. Compensation will still not be shown on the MLS for either transaction type.
The new rule is that buyer-broker MLS participants must sign agreements before showing a home to a buyer and cannot list remuneration. As of August 17, 2024, residential real estate transactions will be affected by this change.
Commercial brokers don't need written agreements to show CRE properties to buyers for settlement compliance. However, your brokerage may have different compliance standards, and it is important to consult with your broker for their standards. Commercial brokers on non-MLS platforms are immune from settlement commission limits and transparency. Commercial platforms or other non-MLS commercial brokers can continue negotiating commissions until a formal agreement is signed, although ethically speaking, negotiations should be in good faith.
Best Practices:
Brokers and agents should address consumer questions upfront about the settlement to eliminate potential confusion later. Buyer brokers, whether they are CRE or residential, cannot postpone an offer even if compensation is not verified. This is part of one’s fiduciary duty. Federal law bans both residential and commercial real estate agents from steering clients to compensation-only arrangements. Brokers should not limit client listings to only those that pay compensation on both sides of the commission. Sharing commission cooperation information up front helps avoid difficulties before ambiguity can hurt the commercial transaction.
While the NAR lawsuit settlement affects residential real estate, commercial brokers should still be ready to address real estate questions regarding the settlement. Residential real estate is the focus, but commercial agents should watch business developments such as the settlement because it is part of being a professional. It is a good practice to give grace to brokerages that haven't been educated about the settlement, by setting a positive tone by being patient, and helping to educate all participants of the transaction where appropriate. Remember, you can substantially influence how your clients react to change and can help smooth transactions to a successful close. Let’s be respectful and let's close many business transactions together!
With a childhood passion for building and a knack for community transformation, Jana Truman brings a unique perspective to commercial real estate. Known for connecting the dots in complex deals and speaking 'residential,' Managing broker for SVN Accel Commercial Real Estate, Jana is the go-to expert who maximizes value and maintains strong relationships, benefiting clients and residential agents alike.
