There are a number of aspects that I don't understand about the settlement as it relates to my local market- and if I don't understand it (considering I had a long prior career creating training within complex areas of capital markets)- I expect chaos will rule with a very rough transition at best. I don't know how much of my comments will relate back to your market- but it's at least worth discussing some differences. 

In Manhattan, agents belong to REBNY as our trade organization (Real Estate Board of NY). The only agents I know that belong to NAR in Manhattan also sell outside the city. My firm is a member of NAR because we do have some agents that work outside of the city- so as an extension- it's my understanding that we have to comply with this settlement for this reason. We already enacted some changes on January 1 as REBNY volunteered to make changes as a result of the larger settlement (and REBNY and all the mid to large size REBNY member firms were a named defendant in a copycat suit). In NYC - we don't even have an MLS.

Most listing agents here will push for a buyer's agent commission to be offered because the very nature of working with co-op's are complex- and since 70% of our inventory are co-op's, I don't see it changing so easily. I had a recent opportunity to pitch for a  co-op listing- the seller didn't want to pay for a buyer's agent- and chose another agent to list with that complied with the seller's orders...4 months later it's still on the market- that surely says something- especially considering it was a terrific apartment. Even condos here can be challenging to sell because of a variety of regulatory building level issues that also flow into bank underwriting issues.  

I can offer at the entry level side of the business- it was often common for buyers to go the listing agents- because if a buyer is looking at a $350k tiny 1 room studio- a buyer's agent might need to invest 100-200 hours with that client, since it would be a co-op, into working with that buyer for a very small commission- or they can work with a renter for a couple of days and earn more than they would on the sale.  So in my market- entry level buyer activity might not change too much.  That said- most of my clients want more than they can afford- but that's not to say they are struggling. In many of my deals- my clients can afford far more or are receiving family gift funds- and the money to pay all or some of my commission is there. Can some deals be impacted by this issue- of course I expect some- but so far since Jan 1- the majority of listings are including a buyer's agent commission. That said- I am seeing some compression of what's being offered to a buyer's agent commission- with the expectation that if I want more- then I can collect the difference from my client or possibly negotiate it as part of the deal. 

So what happens in the long run in my market? No one knows- but I do think this will push out weaker agents...but what happens in a year or two as the weaker agents leave the business? My guess is- with less competition, but overall higher quality agents- commissions will rise again- and perhaps even at higher levels than before. 

I spent many years working with Wall Street market forecasters- and what I have learned is that even the experts get it wrong a lot of the time- so we shall see. 

There will be side affects to this new ruling which no one anticipated.  No one knows.  It will be interesting.

Good morning Ryan. The attorneys for both sides were paid and have developed a new art of expertise to continue to get paid. Sellers are still interested in the net proceeds after ll expense. Buyers are only interested in out of pocket cash to get the transaction closed. Been that way from the beginning of time. It will not change with a new requirement of developing a word salad. Sound eerily familiar? Enjoy your day.

Good morning Ryan,

I'm so glad that Carol Williams featured your post as I missed it this week. I agree with you the media says a lot of things about the outcome of the settlement and the vast majority of them have been lies. These changes for consumer will not benefit them and I feel strongly NAR is very out of touch with how business is done and what their member's needs are. They are going to loose a lot of members.

Ryan Huggins - Thousand Oaks, CA - I am at least somewhat familiar with your area- as I have family in Westlake Village. Our contracts have been drawn up in council with our attorney's, REBNY attorney's, and to a lesser degree NAR.  I agree the contracts are difficult to understand- something that I know the attorney's acknowledge and are trying to make easier, but for now are truly confusing for most.  A bunch of my clients are attorney's - so for them its not an issue, but for everyone else it is. I have taken to create my own chart that explains the different scenario's to be given alongside the formal contract (this is where my background as a manager/creator of training comes into play). At some point this may become unnecessary, and I will be very happy to exclude my temporary solution. 

We don't have an MLS in my market- though I imagine the copycat lawsuit that we were a named defendant on likely adjusted for this fact. Streeteasy, a listing site- originally created to address the unique NYC market was bought by Zillow 12 years ago. Streeteasy, was listing commission rates, and while almost everything on the site was public information, the site was really being used as a defacto MLS. We also have a system internal to brokers- again, not really an MLS, but likely deemed close enough. 

While I am not educated enough on the circumstances, it was my understanding that the Seattle market made changes years ago along the lines of the changes that are occurring this month and buyers brokers have survived as a group. If it is a 1 to 1 comparison or close- then that is a model for us to use, and to stem some of the fear/stress factor. I could be wrong on how close it is to our upcoming changes- but it is at least a partial case study at a minimum.  There is a lot I don't like about the upcoming changes- especially the immediate chaos, but I am not too concerned about being pushed out as a buyer's agent. Perhaps that is due to the specifics of my market, but maybe not.

My firm, which is part of the Forbes Global Properties network, is holding an event for NYC agents at the Forbes, NY Headquarters on Tuesday (I believe it will be open to other brokerage firms since the panel will be brokers from a few different brokerages). My director asked me if I had any questions that will be useful for the panel since I am viewing this analytically rather than from emotions unlike so many of the agents that will be in attendance. Tuesday's event should be interesting. 

Ryan excellent post - you spell out a lot of what is confusing to most people and that includes both Sellers and Buyers Agents.  NAR is so off track with their 'thinking' for so long.  Their recent action will have consequences - and they will be loosing a lot of members.

At the End of the Day I think it simply changes Buyer Agents Income . I think Sellers will  reduce their payments to a Buyer Agent by 33-50% ……

Ryan Huggins - Thousand Oaks, CA  -  I attended the Forbes panel on the upcoming changes- co-hosted by my firm open to all agents in the city. As I kind of suspected, much of the event was a little basic for what I hoped for. We made the event interactive for all audience members- with multiple choice questions answerable on our phones. Surprisingly there was a minority portion of the audience that was not familiar with the upcoming changes until this past week. Much of the interactive components focused on the comfort level of agents with the changes in the structure- and helping them feel comfortable with the changes- since it will be the law of the land in 10 days anyway. 

There were 2 things that truly struck me as important as I left the event. First, changes were still in process to forms and will likely be still happening over the next week. This will only leave a couple of days maximum for agents to have some finalized forms, though to be fair- each firm is giving agents a broad enough picture to explain the changes anyway. I managed a lot of change over the years with Mergers and Acquistions, Regulatory Changes, Systems Changes, etc- so I know when a roll out is going to be rough- and I see these first few weeks as being chaotic. Luckily- mid to late August is historically a slow period here (I can't speak to the rest of the nation) as many people are getting in their last licks of summer. 

It's worth noting for clarity- in NYC REBNY agreed to enact these commission related changes as of this past Jan 1- even though it was going to be a work in progress through the national deadline of August 17. 

The other observation was based on one of the panelist's experiences- which was close to my own experience with these changes in a listing pitch meeting. The panelist, who has the largest podcast in NYC real estate (which is likely a bigger deal here than for other markets), explained that he had worked with a client on multiple sales throughout the years. The seller saw the headline stories- and refused to take on his repeat client without offering a fair buyer's agent commission - in fact the seller wanted to pay nothing to the buyer's agent. The panelist ultimately told his repeat client- that he wouldn't take the listing without paying a fair buyer's agent commission- and the seller wound up going with another broker. Fast forward a few months- and not only did the panelist have the apartment next to his former clients up for sale- but the listing broker that ultimately took the listing confronted the panelist- and told him that she made a mistake, and the panelist was right for standing up for the buyer's agents and of course the listing isn't selling with no commission being offered to buyer's agents. The panelist is expecting his former client to come back - likely in the next few weeks as the listing agreement with the other broker expires. 

I had a similar experience myself- I had a referral client (and the person that referred this seller to me has referred 5 others to me that I helped - all willing to refer me to others as well) that didn't want to pay a buyer's agent commission. This is also a listing in a building with very difficult co-op board- no way would I want to take this listing without paying at least a reasonable buyer's agent commission- as this building will make buyer's (and the agents of course) jump through ridiculous hoops. I lost the listing to a discount agent who agreed on no buyer's agent commission. It's a great apartment- but it's not selling, and not getting a lot of buyer traffic either. In a month or two, I won't be surprised if the seller reaches back out to me. For reasons outside of the client or commission  issues- I am not sure I want to even take the listing if the option comes back to me (more to do with the behavior of the co-op board).  

One final point raised by the panelists - From the new development perspective, despite the buyer's agent commission structure being reworked and implemented in NYC back in January, new development commissions have not changed. The large corporate entities value buyer agents- and know the business can't be done without them. Overall this panelist observed that as a general trend- buyer's agent commissions in new developments have continued to rise over the years.  I have an accepted offer yesterday at a high end new condo tower, and the developer is, true to trend, offering a commission greater than I would receive on a resale.  The sponsors know they need to make a compelling offering to the buyer's agents to sell out. 

I hope this feedback helps.

Ryan Huggins - Thousand Oaks, CA -Yes, my market will be very different- but hopefully there are still aspects I described that will still be relevant and useful. Approx 70% of our inventory are co-op's and 30% are condo's- and the stray 1%-2% in those approximates make up the townhouse/brownstone 1-4 family buildings. Naturally these aspects alone will make for a very different situation. In most of my deals, my clients don't have an inspection- or if they do, very little will impact my negotiations- since it's really the attorney due diligence on the building that is more important since the buyer will only be directly responsible for the interior of the apartment. Usually the bigger issues here will be on building management, more of an issue on monthly charges- which could be substantial- but you are either going to buy/not buy or negotiate on price if there are issues because the individual owner won't be able to fix problems outside the walls of their apartment. 

For new construction- since we are mostly based on a vertical living arrangement- it's obviously different than single family housing stock. We do experience the same issue if buyers go to the office without a buyer's agent by their side- then typically the buyer's agent wasn't going to get paid by the developer. That said- since we are vertical- and a small 2 room studio can potentially be over $1m with choices in plenty of other new developments and it's possible a 1 bed can cost over $2m- this is why the developers value buyers agents. 

First of all I got a chuckle out of this honest assessment - because I've always felt the same way: "Realtor is a real estate licensee who is a member of a not really optional trade group."😂

This post is well thought out and written explanation. Now I will say your commission breakdown is correct but not absolute, as over the last 25 years, buyers have paid me portions of to 100% of my compensation...but I realize I'm in the minority that always used a buyer broker agreement to protect both parties.
As for the rest of what you explained and forecasted, I tend to agree and it will be very interesting to be a REALTOR in the next 12-18 months of this "new" old frontier. Well done Ryan Huggins - Thousand Oaks, CA this was an epic post to undertake.