Agents Are Still Being Compensated, But How They Are Is Evolving

Nearly a year has passed since the National Association of Realtors’ (NAR) commission lawsuit settlement agreement business practice changes went into effect and the doomsday predictions have yet to pan out. Homebuyers and sellers are still hiring real estate agents to help them with their real estate transactions and real estate agents are still getting paid for the services they provide. 

However, at least in some places, the way in which agents are getting paid does look a little different. 

Although the terms of the NAR settlement did not ban the practice of cooperative compensation, which occurs when the listing broker splits their commission with the buy-side broker, due to the continued potential for steering, and legal concerns, many in the industry have stopped engaging in the practice. 

“In many parts of the country, the buyer’s agent is still wanting to call or text to find out if the seller or even the listing agent are offering anything, but those people are clinging to the past,” Linda O’Koniewski, the broker-owner of Leading Edge Real Estate, said. “That isn’t following the spirit of the settlement.”

Threats still loom

One of the biggest threats looming over the practice of cooperative compensation is of course the Department of Justice (DOJ). In several legal filings over the past two years, the DOJ has made it clear that, not only does it take issue with cooperative compensation, but it also believes offers of compensation should not be displayed anywhere and that “blanket, upfront offers of buyer broker compensation by sellers or their listing agents constitute an anticompetitive practice that inflates costs for homebuyers and sellers.” 

While the DOJ has yet to take action regarding these concerns, and the appetite for antitrust litigation seems to be waning under the Trump administration, the potential for sweeping action still lingers. 

Despite these concerns, some listing agents are still offering to split their commission with the buyer’s agent. Critics of the practice attribute this to a variety of reasons including a lack of education and stubbornness, but some of the blame could certainly be placed on the listing agreement forms provided by some state and local Realtor associations. 

“When compensation was removed from the MLS through the settlement, a lot of people, I feel, skirted the spirit of the settlement by moving the mechanism of cooperative compensation from the MLS and onto forms,” James Dwiggins, the co-CEO of NextHome, said. “The whole crux of the lawsuit was that if you are going to tell a buyer’s agent what you are offering before they’ve submitted an offer, then steering could potentially occur.” 

Forms are key

The inclusion of cooperative compensation in forms promulgated by some state Realtor associations sparked the interest of the DOJ, which notably launched a formal inquiry into the California Association of Realtors’ (CAR) forms. 

As a result, CAR made some significant changes to its forms, including its listing agreement which previously provided an option for listing agents to offer cooperative compensation.

“Forms are a big part of what they looked at in the lawsuit and CAR is the one that is responsible for forms that California Regional MLS members use, and they removed all offers of cooperative compensation from all of their forms,” Art Carter, the CEO of CRMLS, said. “So now there is no way for a California member to use the forms provided by CAR and offer cooperative compensation.” 

While CAR made these changes, other state and local associations did not. Tennessee is one state that still includes an option for cooperative compensation on its listing agreements. 

“A lot of brokers just don’t want to change anything. They don’t want to do anything different with compensation. They are stuck in the traditional model of doing things, and it is going to hurt them because we know the plaintiffs’ attorney have already started their audits of MLSs, and I believe the large firms will be on deck next,” Phillip Cantrell, the broker-owner of Benchmark Realty in Tennessee, said. “We tried to work with the state association to adopt some of their forms, but we just didn’t feel like they adhered to the letter or sentiment of the settlement.” 

In order to avoid future industry litigation, Cantrell, whose firm promulgated its own forms, said he would like to see Tennessee and other state associations that allow for cooperative compensation on forms remove the option from their forms. 

“The settlement rules say specifically no guaranteed shared compensation on the MLS, so they just moved the section on the state listing agreement and rearranged a few words,” Cantrell said. “Just because it hasn’t been challenged in court yet, doesn’t it won’t be in the future.” 

While Dwiggins acknowledges that some associations may be weary of making the change that CAR did, he feels any initial discomfort is worth it.

“When CAR removed cooperative compensation from its forms, it did cause some controversy because people were worried about how they were going to get paid, but 45 days later they all realized that you just put the request in the offer. It becomes a deal term and then the seller can choose what they want to do,” Dwiggins said. “That removed all liability because you aren’t predetermining an amount you are going to pay the buyer’s agent before an offer is received.” 

Dwiggins is not alone in hoping that this becomes the industry standard for doing business.

“Brokers need to stop offering and advertising a buyer agent concession,” O’Koniewski said. “In doing so, I think you are breaching your fiduciary duty to your seller. I recently surveyed my agents and no one is even bothering to call or email the listing agent to find out what the seller is offering, they are just writing it into the offer.” 

Agent compensation has evolved

Although the past year has had its share of ups and downs, at eXp Realty, Holly Mabery is pleased with current evolutionary path agent compensation appears to be on. 

“I really like the idea of the decoupled commissions because it empowers everybody to negotiate more,” said Mabery, eXp’s senior vice president of brokerage operations. “Especially in buyer’s markets right now, I’m seeing some of our buyer’s agents get paid more than the listing agent because they are working harder  — showing more properties, negotiating tougher and really educating their clients on all the work they are doing. The clients are happy to pay them for all of this work. It is unfortunate that there are still pockets where agents don’t want to make the change.” 

As the real estate industry continues to adjust to the post-settlement landscape, it’s clear that while buyer and seller behaviors haven’t drastically shifted. However, the mechanics of agent compensation are evolving.

While some remain resistant to change, others see opportunity in the new approach, recognizing that decoupled commissions can empower both agents and consumers. The next chapter in this ongoing transformation may well be written not by lawsuits, but by those willing to adapt.