Industry Trends

What NAR’s New Commission Rules Mean to Relocation

When it comes to relocation home buying and selling, one thing is for certain. It’s a whole new ballgame. Here’s what relocation managers need to know about the new playbook.

How We Got Here

In recent months, the National Association of Realtors agreed to settle several class action lawsuits that called into question how real estate commissions are paid. Sellers argued that the seller-funded commissions paid to buyers’ agents was an assumed cost baked into the real estate process – and one that may not have been needed in order to motivate a property’s sale. Historically, the seller had limited means to negotiate if or even how much commission they were willing to pay a buyer’s agent.

The settlement, effective in August, is bringing about perhaps the most significant changes in how homes are bought and sold in decades. This not only significantly impacts the buyer/seller, but also the relocation teams that are guiding transferees through the home buying and selling process.

What’s Different?

In a nutshell, a lot, and not just for the buyer side of real estate transactions. Written buyer agreements are now required and must meet certain criteria, notes the NAR. Buyers and their agents will need to reach an agreement regarding how the agent will be compensated for their services and generally put it in writing prior to touring a home. While a seller might still offer to compensate a buyer’s agent in some way, it is no longer a given. And, if they do, they can no longer publish that information on Multiple Listing Services. It will be negotiated with the offer.

Typically, benefit caps on the commission expense for listings assumes seller will contribute to the buyer’s broker compensation. While this remains relatively common, this is no longer guaranteed to be the case. Companies are balancing the task of providing flexibility for negotiation, remaining compliant with tax protected home sale program guidelines, containing costs, and continuing to motivate sales.

While the objective of the lawsuits was to increase transparency of the commission structure, how the new rules of the game will translate to global mobility policies is still not completely clear. Some companies have expanded policies to support some form of buyer broker compensation expense. Others are managing the changing landscape by exception until a need for change can be validated.

What Your Transferees Need to Know

One thing is clear, though. The new rules significantly change the experience for transferring employees. A home purchase is one of the biggest investments most of us will make. A strong and trusted relationship with a well-informed relocation consultant an invaluable asset. Before beginning a home search in their new location, it is critical that transferees establish an agency relationship. Even walking into an open house without an established agent representing them can put them at risk of paying unexpected, and even multiple, commissions.

With more than 360,000 real estate brokerage firms in the US, there’s no shortage of agents for a transferee to work with. But how many of those agents are trained specifically in relocation? Do they have the qualifications and experience to understand the complexities of corporate relocations and protect transferees’ best interests under these new rules? Now more than ever, relocation teams must communicate the value-add of in-network preferred brokers. In addition to benefiting from their expertise, transferees working with agents referred through the Relocation Department have much greater assurance of support should any concerns arise. Often, working with an in-network referred agent is required to retain eligibility for their company’s relocation policy benefits.

The Importance of Choosing a Relocation-Savvy Agent

Transferees who select referred agents within their company’s network get the advantage of additional flexibility to switch to another in-network agent if they choose, as well. Viewing properties without that representation could mean signing multiple buyer agent agreements attached to individual properties, days or showings during a period of time.

Transferees selling their existing homes also need to understand NAR’s changes. For instance, the seller has the choice of whether to offer buyer broker compensation and how much. For the short term, we expect to continue to see many sellers offer the buyer’s agent commission or at least be open to negotiating buyer broker compensation as part of the offer process. Over time, it’s likely that various seller scenarios evolve.

How HR Managers Can Help Transferees

Heads of Mobility should continue to monitor industry changes, transferee behaviors and data, and actively engage with their mobility partners, to evaluate potential changes in relocation policies as the real estate landscape continues to evolve with these new practices.

Your relocation management company (RMC) can and should be guiding your transferees through these important steps. Lean into their expertise.

The Value of Partnership

Because there are no hard and fast rules on how commissions are being managed, a relocation management company with strong industry partnerships and in-house expertise is an invaluable asset to helping relocation departments navigate this complex, rapidly evolving situation.

Your relocation management consultants are not attorneys, but they are subject matter experts. They will educate and set expectations in partnership with the preferred relocation real estate agents.

Transferees should be sure to fully review and understand any Buyers’ Agency agreement before signing. Does it include the option to terminate, and if so, within what time frame? What type of agency relationship is it? They will need to keep in mind that with an Exclusive Agency Agreement, any properties introduced by that agent must be purchased through that agent or your transferees could be liable for multiple commission charges.

Reviewing Commission and Compensation Agreements

The compensation section requires thorough review. Transferees need to understand and agree upon the compensation structure and the services to be provided by the agent. Is it a flat fee or percentage of the sales price? Is the seller offering to pay any portion, or will the buyer pay the entire commission?

Remember, commissions are always negotiable! If your transferees are not willing to pay for buyer agency, they can add a clause to their Buyer’s Agency Agreement limiting the agent to only show properties where the seller is offering to cover the buyer agent commission. Understand that this may limit the available properties.

Transferees should continue to partner with their relocation management company and preferred relocation real estate agent to review the contract carefully for clarity around how the buyer agent commission will be covered – before the offer is submitted.

CapRelo’s Commitment to Clients

CapRelo is working closely with our nationwide network to clearly communicate and align processes across the supply chain. We’re also deeply involved in industry thought-leadership efforts underway to help clients understand the potential impact of the settlement and recommend solutions.

Especially as we move through the early innings of this new real estate transaction game, CapRelo’s team is focused on providing clients with up-to-the-minute information for policy decisions and ongoing service excellence for transferring families. Put our real estate experts to work for your team. Contact us today.