Advice for home owners March 20, 2024

PRESS RELEASE FOR SELLER CLIENTS regarding NAR Settlement & Buyer Agent Commissions

For immediate Release – March 16, 2024:

By Scot D. Campbell, Broker of Record  ~  Coldwell Banker-Campbell Realtors, Huntington Beach, CA

The changes reflect the most significant modification of the rules of agency since the practice of Buyer Agency was introduced following the Easton V. Strassburger case in 1984.

The changes to the Multiple Listing Service were announced on March 15, 2024 and the rules will become effective in July 2024:

1) Agents are required to sign a written Buyer Representation Agreement with their Buyer Clients wherein compensation to be paid by the buyer is specified.

2) Seller paid buyer commissions will no longer be published in the Realtor MLS. Instead, the listing agent will publish a dollar amount or percentage that the seller is offering to credit the buyer through escrow for the payment of closing costs including the Buyer Agent commission.

 The NAR announcement has left many Home Sellers with questions and concerns:

Q: Will buyer representation agreements become mandatory under California law?

A: We don’t know whether there will be future proposed legislation that requires California licensees to use buyer representation agreements; however, it may become a practical necessity in order for Buyer Agents to get paid a commission.

Coldwell Banker-Campbell Realtors uses a one page Simple Buyer Representation Agreement along with the C.A.R. Standard Form BRBC (which specifies that the seller credit money from escrow to pay the Buyer Agent commission).

The Standard Form CBC (which specifies seller paid Buyer Agent commission might be used as an alternative especially for VA & FHA transactions… more on this later in this Q&A)


Q: What if a buyer doesn’t have enough money to pay for a buyer’s agent?

A: The C.A.R. Standard Form BRBC can be included with any offer a buyer wishes to make on either listed or unlisted properties. In essence, a credit to the buyer’s closing costs from the seller pays the Buyer Agent commission in the amount previously negotiated between the Buyer and the Buyer Agent in the Buyer Representation Agreement.


Q: Will this change how homes are bought and sold in California?

A: The answer is absolutely “Yes”. In many cases, Buyers will formally “hire” a Buyer Agent and the agent compensation will be agreed in writing before commencing the process of locating a home to purchase.


Q: Can a seller choose to offer “No Commission” to the Buyer’s Agent?

A: The answer is absolutely “Yes”.  But, practically this has been the case for many years in our area. The California Regional Multiple Listing Service has maintained rules which allow an offer of compensation to the Buyer’s Agent of just “One Dollar”. Yet, sellers have very rarely offered a $1 commission because “little or no commission” was found NOT to be a sound marketing strategy for home sellers who wanted to generate as many showings and offers as possible.


Q: Can a seller choose to offer No Credit to the Buyer’s closing costs when an offer is submitted.

A: The answer is absolutely “Yes”.  But, your Net Proceeds should be your primary consideration. The more money the buyer has available to use for the down payment, the higher the loan they can qualify for, and thus the more they can pay for your home.  If you choose to not offer a credit for the Buyer to use to pay the Buyer’s Agent commission, you are in effect lowering the purchasing power of the buyer… which is not in your interest as a home seller. With no credit offered to pay the commission, some buyers may choose not to see your home.


Q: Without a clear offer of compensation from the seller or published credit amount, is it likely that some agents will make “less effort” to sell my home?

A: The answer is an absolute “Yes” for Buyer Agents representing VA Loan Buyers (if they feel there is no way to close the transaction and get paid). Buyers using VA financing are not allowed to pay any commission to the Buyer’s Agent.  And, many FHA Buyers simply do not have the funds to pay a Buyer Agent commission. This is a very legitimate concern for home sellers and has been the subject of several calls I received today.

We are working to get clear guidance from our attorney now.  Although it may not be allowed by NAR rules for the seller to offer compensation to the Buyer Agent through the Realtor MLS, it appears that a separately published written offer by the Seller to compensate the Buyer’s Agent is allowed by law (and common sense).  Certainly, a seller who wishes to pay a Buyer Agent (legally an independent contractor) for their services should be allowed to do so for VA, FHA, and any other transaction for that matter.


Q: In order to better motivate agents who represent buyers to show & sell my home, is there another way that a seller can publish an offer of compensation to the Buyer’s Agent once the new NAR rules go into effect?

A: The answer is most certainly “Yes”.  A simple blog post on our brokerage website could be a very effective mechanism for publishing the seller’s written pledge to pay the Buyer Agent commission.

When asked by a Buyer Agent about commission, the agent could simply refer them to the published blog post which will have the commission document. The California Association of Realtors already has a form for this purpose, and it can be added as an addendum to the Residential Purchase Agreement.

Certainly, the Buyer Agents who work with VA, FHA, and other low downpayment buyers will be comforted & incentivized by the fact that know they will be paid a commission at close of escrow for a job well done (even if lending rules or available buyer funds do not allow them to get paid a commission by the buyer).


Q: If I offer to pay a Buyer Agent commission and the Buyer demands the majority of the commission be credited to them in escrow, I am concerned I will not get the good service I am paying for… How can I be certain that the Buyer’s Agent is going to get all the commission I paid through escrow?

A: We are verifying this with our attorney. For now, we believe the answer is “Yes”.  The blog post that contained the offer to pay the Buyer Agent commission could be conditional on all funds being paid to the Buyer Agent brokerage.


Q: If a Buyer and Buyer’s Agent have entered into a Representation Agreement, what is the mechanism for the Buyer Agent Commission to be paid?

A: The California Association of Realtors has already created a form for this purpose.  The form is an addendum to the residential purchase agreement, and it indicates the amount or percentage of the purchase price that the seller will CREDIT to the Buyer through escrow.  The Buyer Agent is then compensated by the Buyer through escrow as per the terms of their signed Buyer Representation Agreement.


Q: Is there a way that sellers can publish a CREDIT to the Buyer through escrow so that the Buyer can pay the Buyer Agent’s commission once the MLS system no longer publishes the commission payable to the Buyer’s Agent?

A: Yes, it may be possible for us as your listing agent to publish a blog post which includes the buyer credit addendum already filled out.  The form would indicate the amount of the credit you are willing to pay at close of escrow.  When asked by a Buyer’s Agent about the amount of the credit you are willing to pay, I could simply refer Buyer Agents to the blog post which would have a downloadable document they can add to the Residential Purchase Agreement.  The Buyer’s Agent is going to be keen to learn whether the credit is sufficient to pay the agreed commission in the Buyer Representation Agreement because the buyer is certain to ask.


Q: How large of a commission should be offered to the Buyer’s Agent (if no Buyer Representation Agreement has been signed or as the seller you wish to dictate how much the Buyer Agent is paid)?

A: Commissions are negotiable by law. Just as we have been doing since before yesterday’s NAR announcement, our Seller Clients decide how much commission should be offered to the Buyer’s Agent.

The amount you choose to offer affects your net proceeds… and it also affects the actions of the Buyer Agents (who voluntarily spend time trying to procure a purchaser for your home). So, the amount offered should be consistent with your goals for your net proceeds and at the same time be part of the overall marketing strategy for the property which seeks to get as many buyers to the home as possible to procure multiple offers.


Q: How large of a credit to the Buyer’s Closing Costs should be offered in the addendum (if the Buyer has signed a Representation Agreement with their Buyer Agent).

A: Just as Commissions are negotiable by law, the credit you elect to offer the Buyer for Closing Costs is negotiable. The amount you choose to offer affects your net proceeds, and this decision also affects the actions of the Buyer Agents who spend their time trying to procure someone to purchase your home. Finally, the credit amount may also determine the maximum amount buyers can afford to pay for your home.  The amount offered should balance all of these concerns.

Ultimately the Buyer Agent commission or credit amount offered should be carefully considered and consistent with your goals for both net proceeds… and as a successful component of the overall marketing strategy.  For our seller clients, it is always our intent to maximize:

       1) The number of qualified buyers coming to see the property

       2) The number of offers submitted by buyers

       3) The sale price & net proceeds (based on the seller’s desired terms)

Certainly, the law of unintended consequences is now in effect.  It will take a little time for the residential real estate industry to find a new set of standard practices. 

We are in consultation with our attorney and top attorneys at C.A.R.

It is my goal as the Broker of Record for Coldwell Banker-Campbell Realtors to minimize any negative aspects for home sellers which may result due to the rule changes announced by NAR.   

I am available to speak with you on the telephone or we can meet in person at our oceanfront office to answer all of your questions via phone, text, or email: 714-336-0394  ~

NOTE:  The information contained in this Q&A is from the most accurate data sources as of March 17, 2024.  It is possible and likely that bulletins & rulings from the California Department of Real Estate, Federal Department of Justice, and Federal Judges may clarify or change the landscape.  We will issue further guidance as new information becomes available.  We welcome your inquiries as to any changes, and it is recommended that you verify all aspects contained above as you move forward with your real estate transaction.