Turning an industry upside down or making small changes?

It may be in the eye of the home buyer or seller.

Broker associations have changed the rules by which brokers and their clients discuss how and how much those brokers get paid.

The standard 5% or 6% commission is traditionally split between the agent representing the seller and the agent representing the buyer. Agents say the commission has always been negotiable.. However, in order for a home or apartment to be listed in a local association’s Multiple Listing Service, the database that lists most homes for sale, a compensation field was required in the listings. The field could be left blank, but that is rarely the case.

However, thanks to a national agreement with the National Association of Realtors, this is no longer the case.

The impact on Florida’s real estate industry remains to be seen. No state has more influence over real estate agent pay than Florida. The association used to publish monthly membership statistics by state, but stopped doing so earlier this year. The most recent data available, from early 2024, showed there are more than 220,000 real estate agents in Florida.

The largest regional association of realtors is based in Miami. The third largest association covers the counties of Broward and Palm Beach.

What are the changes?

The changes affect the payment of real estate agents who help people buy and sell a home or condo.

First, an agent’s commission can no longer be listed in the MLS (Multiple Listing Service), the database where most homes and condos for sale appear. Previously, MLS required listings to include a compensation field even if a seller did not offer a commission to a buyer’s agent.

Second, when you buy a home and work with an agent, you will need to sign a payment agreement with your agent.

How significant are these changes?

People in the Florida real estate industry downplay the impact of these changes. That’s perhaps understandable, considering how many people make their living or have a side job as real estate agents.

“These are the changes we’re facing and we need to embrace them and embrace them and not try to get around the rules,” said David Serle, president of the Broward, Palm Beaches and St. Lucie Realtors. “Our job is to make sure that everything is more transparent and to protect the consumer even better in the future than we have in years past,” he said.

The Florida Real Estate Agents group emailed WLRN, “We have developed and implemented new forms that reflect these changes to help our members and clients continue to successfully and confidently navigate the complex process of buying or selling a home.”

“I see the changes as really positive,” said Ines Hegedus-Garcia, former CEO of Miami Realtors.

The Consumer Federation of America, however, warns homebuyers. “These two new rules require changes in brokerage practices that could confuse consumers, in part because many brokers will try to maintain the seller’s compensation of buyers’ agents in order to keep the total commission at 5-6 percent,” it said in a press release.

What impact could these changes have?

The big unknown is how this might affect agents’ paydays. For decades, the usual way agents were paid was to share a sales commission, which was usually 5% to 6% of the home or condo’s sales price. This was the cooperation commission and it was included in the offer of the home.

READ MORE: Major litigation over long-standing commission practices could turn Florida’s real estate business upside down

A major lawsuit alleged the industry colluded on the fee, but the National Association of Realtors and David Serle of the Broward Palm Beaches group say it was always negotiable. “I can’t remember a time I’ve ever met a seller or buyer who asked, ‘Hey, are you taking this? Are you doing this? Are you crediting me back? Are you buying me a refrigerator?'” he said. “There was always something we could negotiate into a deal with an agent or broker,” Serle said.

While negotiating a new kitchen appliance or higher closing costs can impact how much an agent earns on a deal, it is not the same as negotiating the underlying commission rate.

Could this mean that agents are paid less?

That may be the case. It creates the conditions for tougher negotiations on compensation.

“I don’t think there is any need to be afraid that compensation will decrease or that someone will pay or not be paid,” Hegedus-Garcia said.

She believes that the new rules will trigger a “value-based discussion about the contribution of the real estate agent to the cause”.

Serle, her counterpart in Broward and Palm Beach counties, believes that “there will be pressure on commission rates.”

So what does this mean for buyers and sellers?

It could mean that nothing changes. Sellers could continue to offer commissions to their agents and to the agent who brings in the final buyer.

But everything needs to be negotiated more transparently. Buyers must now have a written agreement with their agents detailing how they will be paid.

Why did all this happen in the first place?

Several federal lawsuits have been filed against the National Association of Realtors, arguing that its agent compensation rules are illegal. The trade group signed a settlement in March requiring it to make these changes and pay more than $400 million in damages. The NAR continues to deny any wrongdoing.

But the matter is not yet a done deal. A court hearing for final approval is planned for November.

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