Prepare your agent team and sources of business for the outcome of the NAR Settlement
Control the narrative. Do not let the Relocation Management Companies translate your message to the corporations. They need to hear it directly from you. The RMCs do not understand real estate commissions and these lawsuits at a granular level. They may try and ask you to do things that put you and your company in legal jeopardy, not them. Explore all of the possibilities of how incoming referral commission and referral fee options may be handled before the July deadline.
Start amping up negotiation training. While agents negotiate all the time, this is different. It will be more important than ever to ensure the agents are equipped to negotiate their commission effectively. Negotiating compensation could possibly come at any time during the transaction but should really be negotiated before anyone sets foot in a car with a buyer.
Be prepared for a lot of confusion and pressure from outside sources. We may be faced with a variety of mandates that may come from the state association level, the MLS, the local market, or the brokerage. It is going to take a while for this to shake out. Engage with your associations to make your voice heard. Especially in states where buyer representation is quite a foreign concept.
Step up professionalism on the team. This isn’t the time to allow the agents to freestyle. While I understand they are independent contractors, when they agree to be on the relocation team, they agree to comply with your performance metrics. We have to force everyone to be better at their job to reap the rewards. It is a time for the professionals to shine.
Clearly articulate value. Treat buyers like sellers. Give agents a required use buyer consultation playbook to ensure they create the value that equals the compensation they deserve. It might also be time to rework the listing presentation.
Take a close look at your team. While it is optimum only to use the most experienced and knowledgeable agents, they don’t always want relocation business due to the skyrocketing referral fees from outside sources. So unless the corporations agree to a fixed compensation amount for their transferee's buyer’s agents, similar to what they do on corporate listings, then the referral fees generated could be reduced significantly. It's important to hang on to those valuable, high-performing team members.
Get to know your local media. If they don’t have someone translating the information, they will form their own opinions and push misinformation. The day the settlement was announced, a news program reporter said on live TV, “This could slash the price Americans pay when buying or selling their home. Typically, real estate brokers automatically charge about 6% commission on the price of a home sale. Those commission fees will be negotiated lower or eliminated altogether. So a $400,000 home could theoretically save the seller as much as $24,000 in fees.” See the problem here? They don’t know what they don’t know.
Focus on buyer agreements. If buyer representation agreements are common or required in your market, you are ahead of the game. If not, start working with your leadership and legal team to determine how you will train your agents and if you will use a company-generated agreement or something from your state association. Educate the RMCs as everything evolves so they aren't surprised by new documents. The key here is to ensure it is a buyer-friendly document that clearly states how buyer representation works. Sadly, many documents out there are designed solely to protect the broker and agent. We don’t need that right now. Transparency is key.
Help those hurt the most. First-time homebuyers, veterans, and minority buyers will suffer the most with the changes if it becomes the norm for the buyer to pay their own commission. Create some programs to support them and become knowledgeable about the over 2000 Homebuyer Assistance Programs available. Let's hope that the lending rules around who pays commissions are restructured, especially for those eligible for a VA loan.
Agent attrition. Maybe it’s okay for agents to make less when they are less experienced or less productive. It will clear the field of part-timers and ‘one deal a year' folks who aren’t serious anyway. Scuttle them over to your license-holding company and nurture them to refer. Their contacts still hold value for your company.
Focus on new revenue sources. I know you hear this from me all the time, but now it is more critical than ever.
Shift your mindset. Look for the opportunity in it. There is a lot of brain power in our industry. Become the expert in your market for your sources of business. They are going to look to us. Get engaged in your leadership’s discussion around the strategy of how to execute the changes that are coming. We can’t let our sources of business dictate how we can perform or even how the pay structure will work. We must stay in compliance, protect everyone legally, and get what we are worth, all while offering value. That rests solely on us and how we move forward in this new world. They will need to adapt to our lead.
So if less experienced agents end up making less per deal or services are offered at an a la carte menu style, what does that mean for referral fees owed to the relocation department and the source that generated the lead? Buyer’s agent commissions could end up being paid as referral fees out of the seller’s commission if buyers are unable to pay the commission. There are many scenarios of how this may play out. Consumers will suss it out, and payment trends will be established that may vary from market to market. There is a lot of work to do to sort through the options. Consumers want to save money, but you also get what you pay for. It is up to us to give them clear options and directives on how the commission is paid and why it matters to them.
RMCs have continued to burden the broker, relocation department, and agent with the financial weight of supporting the real estate services they offer their corporate clients. Maybe it’s time to go back to the early days of relocation when the corporation actually paid the RMC for the work they did instead of their compensation resting primarily on the broker and the referral fees generated from commissions. What do you think? I'd love to hear from you.
