Changes in commission rules ahead for real estate agents

By Caroline Weier

Real estate agents will be required to follow a new commission structure starting in July 2024 after the National Association of Realtors (NAR) recently reached a settlement to resolve a string of lawsuits in federal court.

Real estate agents in St. Anthony are still assessing how the new commission rules will affect them.

NAR agreed to pay $418 million in damages over the next four years to end litigation claims brought by home sellers claiming a lack of transparency in broker commissions. NAR president Kevin Sears and chief legal officer Katie Johnson announced the settlement in late March.

If the courts approve the settlement, the NAR will bar offers of compensation for the commission to be listed and shared on the multiple listing service (MLS) and require participants to enter into written contracts with their buyers.

This doesn’t mean that sellers must stop offering buyer broker compensation, which is the fee paid to the buyer’s agent. Instead, it won’t be listed on the MLS, according to Chris Deming, a Realtor with RE/MAX Results in St. Anthony Park.       

“Currently, the seller and the seller’s broker list the amount of compensation they are offering to a buyer’s broker whose client purchases the home,” said Deming. “The NAR settlement would remove that field of view.”

The bottom line: Sellers, agents and prospective buyers will need to clearly communicate how real estate commissions are going to be handled prior to houses being shown for sale.

Nate McCallister, a newly-licensed realtor at RE/MAX, said there is a lot of uncertainty surrounding this shift and he is concerned for first-time homebuyers having to find a way to come up with both a down payment and buyer agent commission.

Colleen Healy, a realtor from Keller Williams Integrity Realty in St. Anthony Park, said despite worry for homebuyers, there are some positive aspects of the settlement. A large part of it will be ensuring clear communication and transparency between agents and clients, which is the way many Minnesota realtors already operate, she said.

“I think it’s going to be a shift in really making sure we are dotting our I’s and crossing our T’s before we start showing houses,” Healy said. “It’s making sure we’ve had all these conversations and we really understand our buyers’ financials before we show houses, which has been the way of work that has not necessarily been required, so I think that is a good thing.”

Despite some negative media portrayal, the new commission structure won’t greatly vary from the current laws that already govern the activities of Minnesota realtors. Minnesota has always been a consumer protection state and has always had buyer contracts, said Barbara Swadburg, a St. Anthony Park realtor with Linden Realty.

As always, commissions will remain negotiable.

“It is a change in the paperwork, but it is certainly not a change in the way that Minnesota realtors are doing their jobs,” Swadburg said. “I think that there will be widely acceptable ways of handling the commission that will be worked out between the buyer and the seller. I think there will be ways of working it out.” 

Caroline Weier is an intern writer for the Bugle and a third-year student at the University of Minnesota’s Hubbard School of Journalism and Mass Communication.

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