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Seismic shifts anticipated for real estate industry's compensation landscape

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Seismic shifts anticipated for real estate industry's compensation landscape

In the wake of NAR’s settlement proposal, agents must chart a new way forward.

In an ever-evolving real estate landscape, where markets fluctuate and dynamics shift, the role of a real estate agent transcends mere transaction facilitation. It encompasses a holistic approach to enhancing productivity, maximizing sales potential, and ensuring client satisfaction. In today’s competitive environment, staying relevant and agile is not just advantageous – it’s imperative.

Adapting to market demands and legal nuances is paramount for real estate agents, especially those navigating the intricacies of buyer representation. The outcome of the commission lawsuits underscores the need for agents to take their buyer presentations up a few notches. This entails showcasing properties and providing comprehensive support and guidance throughout the purchasing process.

Demise of buyer’s agent fee

NextHome cofounder and CEO James Dwiggins predicts seismic shifts in the real estate industry’s compensation landscape. Commission lawsuits and mounting pressure from federal agencies are poised to dismantle the status quo, compelling agents to brace for inevitable change.

He expects the lawsuits to end with a settlement, thus highlighting the impending transformation in the industry’s operational structures. Central to a recent discourse was the looming shadow cast by ongoing commission-based litigation, notably the high-profile Sitzer | Burnett case, which recently concluded with a jury ruling against the National Association of Realtors and major franchisors for alleged commission rate manipulation.

Weathering the storm

This is just the beginning, though. Dwiggins warned of impending regulatory intervention from entities such as the U.S. Department of Justice and the Federal Trade Commission, suggesting an imminent reshaping of compensation practices within the multiple listing service (MLS).

Moreover, he lamented the industry’s need for leadership amidst mounting challenges, foreseeing a future with a diminished agent pool. Citing a perceptible shift in consumer awareness, he emphasized the urgent need for industry introspection in the face of negative publicity.

Underscoring the need for proactive measures to weather the anticipated disruptions, he encouraged agents to secure buyers’ agent agreements, paralleling listing agreements in importance, and for brokerages to institutionalize this practice within their policies.

Thrive in ’25

To thrive amidst uncertainty, Dwiggins urged industry professionals to recalibrate their approach, treating buyers with the same diligence as sellers and elucidating an agent’s value proposition through comprehensive presentations. Furthermore, he underscored the importance of educating sellers on adequately compensating buyers’ agents.

Looking ahead, he foresees radical changes by year-end, challenging agents to articulate their value proposition effectively to navigate the evolving landscape. Contrary to apocalyptic forecasts, he contends that those adept at articulating their value stand to reap greater financial rewards in the future.

Silver linings

Likely, the traditional practice of a listing agent paying a buyer’s agent fee will fall away. However, Dwiggins expects most buyers to continue using buyer’s agents, with sellers ultimately footing the bill for the buyer-side commission.

Meanwhile, recent research by Redfin points to buyers continuing to work with buyers agents, except that they will be looking for those who offer value in price, service and experience and negotiate fees accordingly. 

As the specter of change looms, Dwiggins’ insights serve as a clarion call for industry stakeholders to adapt, innovate, and assert their value proposition in the face of transformative upheaval.

James Dwiggins photo source: LinkedIn and Real Estate Insiders Unfiltered

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