Published February 14, 2025

REC Difference :: TO De-couple or NOT TO De-couple?

Written by Paige Kahle

REC Difference :: TO De-couple or NOT TO De-couple? header image.

Despite its title, image, and the date of the post, this is not an Anti-Valentine post, but it does cover something important: *de-coupling* compensation in the post-settlement real estate world. It might not be as exciting as chocolates and flowers, but it's crucial information if you're planning to buy or sell a home in the future. Feel free to pick and choose which of the below sections you read, or enjoy it all in one go – just like a box of chocolates!

THE PUNCHLINE :: The Real Estate Collaborative (REC) has embraced the spirit of last year's Antitrust lawsuit against the Real Estate Industry and the August settlement. One of the key takeaways of the consumer-friendly settlement is the *de-coupling* of Listing and Buyer Broker compensation. Sellers working with REC negotiate their compensation to REC, NOT the Buyer's Broker's compensation.

THE BACKSTORY :: As part of last year's Antitrust lawsuit, the plaintiffs made many claims against the Real Estate industry. The primary one was "Why are Sellers *required* to pay out the Buyer's Broker as part of their listing compensation to their Listing Broker?" Fair question, right? Why on earth would a person pay the party that is negotiating against their interests?

For decades, however, this *coupling* of compensation was the industry norm - a Seller would hire a listing broker, contractually agree to a certain percentage to be paid out to that listing broker at closing, and about half of that total compensation was paid out to the broker who brought the buyer. This was how it was done the vast majority of the time. In addition, there was an unspoken industry standard that was to be paid out to the Buyer's Broker (the Antitrust piece of the lawsuit) and this amount was advertised in the MLS for all Realtors to see, but was kept hidden from the general public on the online sites.

On the flip side, when working with Buyers, most Realtors would simply write in this standard percentage in their Buyer Representation Contract knowing that this would be the likely payout by the cooperating listing Broker. This practice reduced competition and also reduced the ability for Buyers to negotiate compensation to their Realtor, based on such things as process, experience, and expertise.

THE SUMMARY :: the 2024 Antitrust lawsuit led to these significant changes ::

* Buyer Broker payout is no longer listed in the MLS;

* The Purchase Agreement now includes a section where Buyers can ask Sellers to pay for their representation;

* Realtors must have a signed Agreement with a Buyer prior to showing a property;

* As Realtors, we must now directly inform both parties that compensation is negotiable.

WHAT SOME BROKERAGES ARE DOING :: Despite these consumer-friendly changes, some Brokers are doubling-down on recommending the Seller negotiate a Buyer Broker payout as part of the Listing Contract - the *coupling* of compensation. (This continues to be legal per the Settlement.) The rationale goes something like this... "If you don't pay out a certain amount, then Buyer's agents won't show your home." -OR- "Buyers don't have the money in their pockets to pay for their own representation, especially first-time buyers." These statements are patently misleading. Buyers' agents have a fiduciary duty to show all requested homes. Plus, Buyers can negotiate compensation directly with the Seller in the Purchase Agreement, ensuring a transparent, flexible, and more equitable process. Further, some Buyers would prefer to pay their Broker directly outside of the PA so that they are not inflating the price of the home and then having to pay this amount off with interest over 30 years. Why do you think some Brokerages are resisting this *de-coupling* change?

THE BOTTOM LINE :: REC advises against including Buyer Broker's Compensation in your listing agreement when selling your home. It's unnecessary and may not benefit you financially. Instead, invite Buyers to negotiate their representation costs in the Purchase Agreement.

DISCLAIMER :: The Real Estate industry continues to face significant challenges. There are very real and valid reasons why Realtors are perceived negatively by the general public. Any criticism is directed towards industry practices, not individual Realtors. REC's mantra via Eboo Patel is "In order to defeat things we don't like, we need to build things we do."

Reach out to us at hello@therecollab.com or call +1 651-412-3765. We are here to make your home purchase or sale a transparent and successful experience.

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