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By now, you have heard media stories — with varying degrees of accuracy — outlining significant changes in residential real estate practices that are likely to reshape the dynamics of home buying and selling. 

These changes went into effect on Aug. 17 as a result of the recent settlement involving the National Association of REALTORS and real estate brokerages. They impose new requirements that should enhance transparency and communication between agents and their clients. Let’s dive into what these new practices entail and how they might impact you as a California home buyer or seller.

For those of you who have bought a home, you may recall getting in the car with your buyer’s agent and looking at a couple dozen homes before entering into a contract to purchase one — and you probably never asked how your agent was being compensated for their time and efforts. Or maybe you knew that it was customary for the seller’s broker to pay the buyer’s broker as a way of marketing the property.

For those of you who have listed and sold a home, you probably recall reviewing listing and disclosure documents, settling on a sales price and agreeing on a compensation amount with your agent. That compensation figure often included a split of the agreed upon amount where part was paid to the listing brokerage, and part was paid to the buyer agent’s brokerage.

Now, as a result of the settlement, the process might look a little different. And in my opinion, this is a vast improvement that will create more transparency in the home purchase or selling process.

Two primary changes went into effect last month:

Mandatory buyer representation agreements 

Buyers working with an agent now need to sign a written agreement before touring a home with an agent. These agreements will outline important terms of the buyer’s relationship with the broker, including what services the buyer can expect and what their agent will expect from the buyer, as well as the compensation amount to the buyer’s agent. 

Agreements may be exclusive, or not. The amount of compensation will be negotiated and documented. A buyer’s agent may be compensated directly by the buyer or may be compensated by the seller, or their compensation may come from a combination of buyer and seller. Ultimately who pays what to the buyer’s agent will be negotiated between buyer and seller during the offer process. 
The buyer and agent might agree to representation only for a particular property or might agree to work together for a period of time. It is worth noting that California Assembly Bill 2992 by Assembly Member Stephanie Nguyen will also limit the initial length of the Buyer Representation Agreements to three months starting Jan. 1, 2025.

Elimination of offers of compensation

Properties listed in a Multiple Listing Service (aka an MLS — our local MLS is called Metrolist) will no longer include any data fields indicating an offer of compensation to a buyer’s agent. And in fact, our California Association of REALTORS Residential Listing Agreements will no longer include the option for a seller’s broker to make an offer of compensation to the buyer’s agent. Traditionally, seller’s agents would specify within the MLS a commission to be paid to the buyer’s agent. This practice is no longer facilitated in the MLS or in the CAR’s Residential Listing Agreement form. Sellers and their agents may still discuss up front what, if anything, the seller is willing to compensate a buyer’s agent or what concessions (aka buyer’s closing cost credits) they may be willing to entertain. Or they can wait and see whether a buyer requests any concessions in a purchase offer.

The implications of these changes are multifaceted.

For home buyers 

One of the most significant shifts for buyers is the need to negotiate agent compensation up front and the potential need to compensate their agent directly, above and beyond the expense of down payment and closing costs. This change can be a bit daunting, especially for first-time buyers or those with limited financial resources. 

On the bright side, this new arrangement also empowers buyers to have more control and clarity over the services they receive. By signing a Buyer Representation Agreement up front, buyers can ensure they fully understand their agent’s role, responsibilities and fees. This transparency can lead to more informed decisions and a smoother home-buying process.

And to reiterate, buyers may still negotiate with sellers to cover their agent’s compensation via the transaction.

For home sellers 

Sellers, too, will experience changes. Without the ability to publish a buyer’s agent offer of compensation in the MLS, sellers may need to consider alternative approaches so that buyers understand what financial impact they face. 

While this might seem like a marketing setback, it also encourages more creative and personalized strategies to attract buyers. Sellers may consider offering incentives up front — a practice that is still permitted under the settlement — such as offering concessions on the home price or covering closing costs. These strategies can make a property more appealing to buyers who now must consider direct agent compensation in their purchasing decisions.

Sellers will continue to rely on their agent’s expertise to navigate these new dynamics. Real estate professionals will play a crucial role in advising sellers on effective marketing strategies and negotiating price and terms that align with the new regulations.
The real estate profession has always evolved in response to changing market conditions and regulatory landscapes. 

For buyers and sellers, staying informed is key. These changes underscore the value of having a trusted advisor to guide you through one of life’s most significant financial decisions. As REALTORS, we will continue to leverage our real estate market knowledge and expertise in navigating these complex transactions. Our goal remains the same: helping people achieve their dream of homeownership with confidence and peace of mind. 

Erin Stumpf, MPPA, is in her 19th year as a REALTOR and is a top-producing broker associate (CA DRE License #01706589) with Coldwell Banker Realty’s Metro office. She served as the 2022 president of the Sacramento Association of REALTORS. The term REALTOR signifies membership of the National Association of REALTORS.

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