New Rules for Real Estate Agents
Audio version available here (1 min. 50 sec.)
Those in the real estate business face critical changes to how compensation is determined from home sales. This can have a severe impact on how you make your money as a real estate agent, so it is imperative you are informed and prepared for the future.
The changes stem from a class-action lawsuit settlement against the National Association of Realtors (NAR). As of August 17th, 2024, the settlement has gone into effect and compensation rules have changed for realtors. The biggest change is that commission rates are no longer posted on NAR’s multiple listing service and “home sellers are no longer obligated to offer commission” to buyers’ real estate agents. However, offers of compensation can still be advertised through marketing vehicles with the seller’s approval.
Typically though, the settlement means that compensation for each agent must now be separately decided on by the seller and buyer parties. This can be done for buyers by entering a written agreement on the agent’s compensation prior to touring a home. The contract is known as a buyer-broker agreement. The amount agreed on must be objective and cannot be a range, so it must either be a fixed dollar amount or a fixed percentage. “For instance, $X or X% is permissible”. For brokers, flexible methods of compensation are still available, and can be chosen from:
“A fixed-fee commission paid directly by buyers
Concessions from the seller
A portion of the listing broker’s compensation”
Though these changes can be a bit difficult to navigate at first, real estate agents can still benefit. With listing agents still capable of compensating the agent representing the buyers, listing agents can encourage the sellers to advertise compensation for the buyers’ agent to bring in a higher number of potential buyers and drive competition for the house. This way, the sellers can see their home sold for a higher price, and the agents can be appropriately compensated for their work.
Change this big can be intimidating and confusing for realtors, but change is a part of business, and the best way to succeed is to be adaptable. Part of being adaptable is having business and tax plans for any potential changes. It’s best to plan with a professional, so get in touch with XQ CPA’s Certified Tax Coaches to optimize your real estate business. Give us a call or schedule an appointment online today.
Phone: 832-295-3353
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Want to pay less taxes? Read XQ CPA's official tax planning guidebook! How to Grow Your Wealth Through Tax Planning.
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