As brokerage firms fine tune how to handle the business practice changes outlined in the terms of the National Association of Realtors’ nationwide commission lawsuit settlement agreement, which are set to go into effect on August 17, many are focusing on how their agents will handle compensation on both the buy-side and the sell-side.
When it comes to handling compensation eXp Realty is not mincing its words — it is not sharing its listing fee with the buyer’s broker. However, the firm says this does not mean it is unwilling to work with buyer’s brokers. But it will be their sellers who make the decision on an offer of compensation to a buyer broker.
The Leo Pareja-helmed firm makes this crystal clear to consumers in its “Exclusive Authorization and Right to Sell” agreement sent to HousingWire by the brokerage. The agreement, which outlines the property being listed, the length of the agreement, the list price of the house, property showings and access, the strategies the broker may use to promote the property and how much the broker will be compensated for their listing services, explicitly states in bold print “Broker (eXp) does not share commission with a Buyer’s Broker.”
In the agreement, sellers have the option to choose to pay their listing broker an exact dollar amount, a percentage of the gross purchase price of the property or an undefined “Other.”
“Other allows us to be flexible with the seller,” Holly Mabery, eXp’s senior vice president of operations, said. “Sometimes there are additional fees, sometimes there are additional considerations, like the seller wants the listing advertised in the Wall Street Journal, which is an additional fee, or the agent provides moving services or something that are over and above the standard scope of a real estate agent, and the fees for those things can be negotiated in advance.”
This section of the form also outlines how the listing broker will handle an unrepresented buyer, allowing the seller the choice to prevent the listing agent from representing a buyer that reaches out to them directly for an additional amount of compensation.
Above the compensation section of the form, again in bold print, it states that “the amount or rate of real estate commissions in not fixed by law. They are set by each broker individually and may be negotiated between Seller and Broker.”
“Ultimately, the biggest thing I would say about our forms is that it was important to us that our forms were very clear and straightforward,” Mabery said. “As an agent is sitting with a seller or buyer, we didn’t want them to be confused. We wanted people to understand as they work through form, how we are going to business together with them.”
The firm’s listing agreement is just one of six forms eXp has promulgated in the lead up to the Aug. 17 implementation deadline. Other forms include an “Amendment to Real Estate Listing Agreement,” a “Direct Compensation from Seller” form, a “Single Property Buyer Broker Agreement,” a “Buyer Broker Representation Agreement,” and a “Disclosure and Acknowledgement of NON-Representation” form.
Agents with existing listings can use the amendment form with their sellers if their properties are not under contract by August 17 to ensure they are complaint with the terms of the settlement.
The “Direct Compensation from Seller” is to be used by sellers who wish to compensate the buyer’s broker from the proceeds of the sale of their house. The form outlines how much a seller who has chosen to offer buyer broker compensation is willing to pay in either an exact amount or a specific percentage of the home’s purchase price. Additionally, it again clarifies that compensation is not set by law and is fully negotiable.
“The seller can absolutely instruct an agent to share what their concessions or offer of buyer broker compensation is and we are telling them that they are completely allowed to do that, as long as they are following their local MLS rules, as some MLSs are saying off-MLS is perfectly ok,” Leo Pareja, the CEO of eXp Realty, said. “But this is day by day, so agents need to pay attention, but as a good rule of thumb is to never do it on the MLS and make sure you are following your local MLS rules.”
Just as it did for its sellers, eXp also created its own forms for its buyers. The results of this effort are the firm’s “Single Property Buyer Broker Agreement,” and “Buyer Broker Representation Agreement.”
The buyer broker agreement outlines the length agreement, what the buyer broker will do, and what their fee will be. Again, buyers can choose to agree to compensate their broker with an exact dollar amount or a percentage of the purchase price of the home and the form notes that the fee is not set by law and is fully negotiable. The form also contains a section outlining how the buyer broker’s fee could be collected from the seller, including a credit to the buyer at closing or direct seller-to-buyer broker compensation. Additionally, the form notes that any amount paid by the seller toward the broker fee will reduce the amount of the broker fee the buyer needs to pay, and that the broker will never retain a fee that exceeds what is specified in the buyer representation agreement.
While the single property agreement contains many of the same fields as the buyer representation agreement, it only pertains to one property, with the option to add a second.
“The goal with the single property agreement is if I am meeting you for the first time and you are getting a feel for the neighborhood and me as an agent,” Mabery said. “The agreement allows us to comply with the terms of the settlement by having an agreement and disclosing the services provided and the fee charged, but it allows the buyer and the agent to get to know each other with the first house and decide if they want a longer term relationship together.”
The final form eXp is providing agents and brokers with is its “Disclosure and Acknowledgement of NON-Representation” form, which brokers will use when they have agreed to not engage in dual agency on a transaction when dealing with an unrepresented buyer or working with a for sale by owner property. If an agent and their client finds themselves working with an unrepresented party on a transaction, the unrepresented party would sign the form acknowledging that eXp is not representing the signer in the sale or purchase of the property.
Both the firm’s buyer representation agreement and listing agreement have been lauded by consumer watchdog group the Consumer Federation of America for being “understandable and fair to consumers.”
Pareja said multiple factors played into the brokerage’s decision to create its own forms.
“We are now basically 17 days out from the implementation deadline and there are still a whole host of states who have not even released their forms and there is a whole host of forms that have been released that are still very confusing per CFA and agent commentary,” Pareja said. “I did not wake up this year thinking we were going to be in the forms business, but when we realized we weren’t that far out and we had nothing, we knew we did not want to be in a situation post-August 17th where we are creating liability for ourselves and our agents. So, if nobody else was going to do it, we were going to have to do something to protect our agents in the field.”
In addition to liability reasons, Mabery added that logistical issues also prompted the firm to create its own forms.
“We chose to write out own forms because, one we are a national company and state forms are typically copyrighted and unless you are a member of that association, you can’t use those forms, so it would be inappropriate to take it across state lines,” Mabery said.
According to Mabery it took the firm roughly a full quarter for eXp to draft and finalize all of these forms.
“We started with the single property buyer broker agreement and that took us a couple of weeks just to verify and make sure that we were working right and then we moved on to the non-exclusive buyer broker agreement, which we were able to move through a little faster since we had done the single property, and then our listing agreement took about a month to refine and that has made a huge difference,” Mabery said.
While getting to this point was certainly not easy, eXp’s executives believe it was worth the effort as they look to not only comply but excel in the new world created by the terms of NAR’s settlement.
“I fully expect to see this messy middle over the next six to 12 months, where folks are probably going to be fatigued from the breakage and the headaches that come with it,“ Pareja said on eXp’s Q2 2024 earnings call with investors Wednesday evening. “And they are going to want to partner with an outfit that understand this stuff because it is probably going to be more meaningful than folks are treating it right now.”
