9 post-Sitzer questions we still don't have answers to

Numerous developments have unfolded since the Sitzer|Burnett verdict was rendered with several copycat lawsuits filed. Multiple Listing Services (MLSs) are no longer requiring any minimum amounts of cooperative compensation to be offered to buyer agents.

Several brokerages no longer require their agents to be members of the National Association of Realtors. Offers of compensation shown on the MLS are now required to be made public on all websites that buyers have access to and, of course, we’re seeing greater implementation and use of buyer representation agreements. 

The result of all of this has been a plethora of ongoing webinars, seminars and training about the representation agreements themselves, how to implement them into your real estate practice, how to present and explain these agreements to buyers, articulating the benefits of representation, and how to demonstrate your value to name a few pieces involved with pivoting to a new way of doing business. 

At the same time, this has led to new discussions with sellers on the various options available to them when putting their home on the market regarding offers of compensation, making them aware of the potential risks and benefits of the path they choose to take. 

Change always brings chaos and disruption, and while many of these issues have been lurking in the background before we knew what Sitzer | Burnett was, they illustrate the work that remains to be done. Our business has become increasingly complex, and we lack protection and enforcement of our ability to ensure compensation on many levels. 

Before the verdict was pronounced, I wrote an article called 58 Questions Agents Should Be Asking About Commission Lawsuits , Some of the questions I raised there have still not been answered adequately. Here are a few.

How will we protect agents who are working with buyers?

While having a buyer’s agreement legitimizes the homebuying process with a tangible scope of agent responsibilities laid out for the buyer, simply having a buyer’s agreement in place doesn’t guarantee much of anything. It is not a failsafe, especially when introducing the concept of signing an agreement to the buyer while many preach that it can be torn up if the buyer isn’t happy. 

While we don’t want to hold anyone’s feet to the fire who doesn’t want to work with us (or vice versa), I think we should be discussing the importance of putting the proper documentation in place should we or the buyer wish to cancel their representation. A contract is a contract and needs to be respected. 

The buyer representation concept is going to be difficult for many buyers to embrace and accept as a new normal, and many buyers will look for a workaround when faced with the prospect of having to pay a fee that they are stretching to afford.

While buyers may love their agent, they can’t always fork over the funds because they are on a budget and need the money for closing costs, updating the property, handling repairs, moving expenses and the list goes on. They will be forced to choose between representation or not due to the economics of it all. 

While concessions like closing costs could be negotiated into the contract or the purchase price increased to account for the buyer agent’s fee, that won’t totally solve a buyer’s affordability challenge with respect to buyer agent compensation, particularly if there are multiple offers on a property. 

Whether or not buyer representation is going to be mandated at the state level (if not already in your state), there should be additional state (if applicable) and mandatory brokerage disclosures implemented to accompany a buyer representation agreement. These should:

• Advise the buyer of their rights and obligations with respect to signing such an agreement
• State that the information they have represented about themselves as a buyer who intends to buy property is truthful and accurate
• Ensure there are no other buyers who will be involved in purchasing a property who have not signed this agreement
• State that should anything change with respect to who will be buying the property, price, criteria, etc., they agree to inform their agent/brokerage immediately so the agreement can be amended or updated
• Represent they are authorized to sign the agreement as a buyer of the property. 

Some buyer representation agreements do address some of this generally, but some may not have gotten this specific. Language should also be included that signing the disclosure(s) and the agreement presumes they have read and understand the documents.

The reason for adding disclosures to a representation agreement is to send a message to buyers that these are serious agreements and to prevent them from playing a game of agent dodgeball, pretending they didn’t understand what they were signing. 

As it stands, pursuing whatever options the buyer-broker agreement calls for — mediation, arbitration, litigation, etc. — may only go so far. All of this takes time and may cost some money. 

We can’t force buyers to show up for mediation or arbitration. Are we going to subpoena them? Many brokers and agents are reluctant to go after the buyer, understandably, for fear of a damaged reputation, potential retaliation on social media, negative reviews and other fallout. It is easy for the buyer to play the victim, and it will put the brokerages and agents who worked with them at odds with each other. 

One brokerage or agent came out ahead with a paycheck and another brokerage or agent lost. The cause of the loss of paycheck (which is the buyer) is never pursued. 

While we need to utilize buyer agreements, we all know that when you delve into the rules of the road regarding compensation, breach of agreement and remedies in these documents, a buyer may become like a deer in headlights and retreat. Will buyers get the official memo from the Department of Justice that this is the new way of doing business before buying a home? Perhaps if they did, they would take buyer representation agreements more seriously. 

However, agents in our industry are going to be the messengers of that decision and there may be distrust and suspicion in that message. As the consumer hears the reasons driving all of this and takes to the internet to learn more, the clickbait media headlines are enough to dissuade people from feeling good about the real estate industry. Running interference before getting a buyer on board is a hefty task. 

How will we create transparency around buyer representation agreements?

Previously, I asked if registering buyer agreements with local MLS boards should happen. To date, I have not come across any discussions about implementing such a system. I have seen astute agents make this suggestion in various social media groups in response to situations where an agent’s client with a buyer representation agreement bought a home with a different agent. 

Since we are essentially “listing buyers” with these agreements, similar to how we list a property for sale with a listing agreement, then all needs to be treated equally when it comes to transparency. For the most part, with an exclusive right-of-sale listing agreement, we don’t have issues with agents going behind the signs of listed properties while there is an active listing agreement in place. 

Neither do sellers seek out other options, for the most part, unless they are unhappy with their agent, the listing process is not being proactively managed, the home is not selling and they’re not trusting their agent’s advice. 

Despite the use of an exclusive buyer representation agreement, we currently lack the ability to know who is working with what buyers. That would allow us to validate information before going down a path to nowhere or discovering when it is far too late that they have signed more than one agreement. 

This isn’t about asking the right qualifying questions. I am assuming that an agent has already done that, as I discuss in Stop! Before You Send That Buyer Properties, Ask These 47 Questions. We enter many situations with buyers from a place of good faith, where there appears to be a cooperative working and engaged relationship, only to discover otherwise. 

We need to create a database where buyers under a representation agreement will be logged and we have a way of searching/vetting this information as part of respective MLS databases. How this could be administered needs some careful thought. Ideally, MLS members should have the ability to do a basic name search. Our business is too much on the fly and before we waste time, we need to have a way of vetting what we are being told — especially at an open house or other lead generation activity. 

Similar to how MLS listings need to go active within a certain time frame from listing documents being signed, or for “Coming Soon” status, we need to put systems in place to ensure the integrity of buyer-broker agreements. 

A timeframe by which buyer representation agreements must be submitted to the brokerage and/or MLS should be established. If the buyer agreement is not submitted within the designated time frame, substantial fines could apply and, if not corrected within a couple of business days as defined by a rule, the buyer representation agreement with that brokerage is considered invalid and would have to be redone and submitted. 

If this sounds too harsh, it is to stress the importance of the time-sensitive nature of these documents. Perhaps the buyer representation agreement is submitted to the brokerage’s transaction management system (as would be required for compliance) and a one-page sheet summarizing the terms of the agreement is sent to MLS along with the name of the brokerage(s) and agent(s) representing the buyer(s), buyer name(s), current address, phone numbers, email addresses and any specific terms/conditions that need to be noted. 

While there may be pushback and some resistance to the “extra work” required, if we are going to have to use buyer representation agreements then we need to treat them the same way we do listing agreements. It is for all of our protection. 

As it is, we are required to register properties that are listed where the seller does not wish to go into MLS, so there is no reason why we cannot do this with buyers. 

No matter who is determined to be able to have access to the buyer representation database, it should only show the name of the buyer and who they are registered as working with as far as brokerage and agent, with no other information. All buyer contact information should be private and only visible to the brokerage/agent who is registered as working with that buyer, along with the terms of the representation agreement, including the expiration date. 

If a buyer agency relationship is terminated or modified, all documentation would need to be submitted to the agent’s brokerage and an updated summary sheet submitted to the MLS within a certain time frame to keep all accurate and honest. While discrepancies may arise, implementing procedures to track and manage buyer agency agreements would help keep everyone accountable. Without it we have the Wild West. 

As for privacy concerns about buyer names, let’s not forget that when we pull up a listed property, we can go to the tax record attached to the listing and see who owns it, when they bought it, if they paid cash or took a loan and for how much, etc. We have access through property reports, the Realtors Property Resource, the Forewarn app, county property appraiser and tax assessor records, along with numerous other tools at our disposal to help us vet and learn more about those we are engaging with, and the properties involved. 

A lot of information can be uncovered about a seller or anyone for that matter by simply Googling and looking at social media profiles. If a property is held by a corporate entity, any savvy agent knows how to track that information down to see who the principals are behind those entities. 

When it comes to buyers who want their identities concealed due to being famous or for security reasons, some workarounds should be put in place. Additionally, with respect to law enforcement, military or any kind of security-related profession, special provisions could be established as well. 

How will we increase transparency around the listing side commission?

With a greater push for transparency in our profession and buyer broker compensation published on public MLS portals, MLS sheets and all consumer websites, it is high time that everyone — agents and consumers alike — should be able to see the amount of the listing side commission that the seller agreed to pay their agent. Transparency is not a 180-degree view, but rather a 360-degree one. 

Doing so will help buyers better understand all compensation involved in a real estate transaction and the ramifications of what is being offered and how that may impact the offer they make. Whatever amount that seller is offering, if any, the buyer will get a sense of what the agent representing them may be up against and can strategize on the best approach with their agent. It will also prepare them for what they may have to pay their agent. 

It is easier to establish credibility about buyer agent compensation with a buyer when listing and buying compensation is disclosed for all to see. If the buyers are not working with a buyer’s agent and electing to go through the listing agent for whatever reasons, they will need to work through these same issues with the listing agent. 

This will also hold listing agents accountable regarding what is charged on the seller’s side and how that may affect potential compensation to a buyer’s agent based on what co-op compensation, if any, is being offered. Without this transparency, a listing agent can discourage a buyer’s agent from asking for compensation by alleging that the seller is only offering a very small amount on the listing side; however, there is no way of verifying that, short of getting brokers involved and requesting to see a copy of a listing agreement, which likely won’t be provided. 

This will create greater transparency for consumers, agents and brokerages alike. Everyone should know what both sides get paid. 

How can we legally structure an hourly or retainer fee?

There has been a little discussion about this, but nowhere near the degree there needs to be. In the most recent Statement of Interest of the United States weighing in on the Nosalek vs. MLS PIN case dated Feb. 15, 2024, the U.S. Department of Justice wrote: 

“Preventing sellers and listing agents from setting buyer-broker commissions would promote greater price competition and innovation in the market for brokers’ services. If buyers set the compensation for their own brokers directly, some buyer brokers might choose to offer flat fees or hourly rates in lieu of percentage commissions, since the amount of time and effort required by a buyer broker has a weak correlation, if any, to the ultimate sales price of the house. And most, if not all, buyers would likely prefer a fee structure that does not reward their broker for helping them to pay more for a home.”

I am not going to debate the DOJ Statement of Interest here, but we as an industry need guidance on how we might structure an hourly fee arrangement or retainer fee and the mechanics and legalities of implementing such a structure with respect to applicable forms, disclosures, fee agreements, coordination and submission of payments. If agents are left to figure this out on their own, there is going to be a tangled web of confusion and potential legal exposure. 

Documents need to address 

• Whether money paid for services can be refunded
• Whether money paid for services can be credited towards the buyer’s purchase and within what timeframe
• Whether there is a minimum purchase price in which it would be credited
• What circumstances may apply

We are entering uncharted territory. Our industry was never set up like the legal profession, where every communication and work done on a client’s behalf is billed to the client. Having this flexibility would also shed some light on the amount of time and work that is truly involved on behalf of a buyer, long before any offer is ever written.

For more information, see my 2018 article for Inman: Parker Principle 1: How Fees Will Help Real Estate Go From Sales To Service – Inman.

With the actual ability to enforce buyer agreements left to chance, the ability to collect a retainer fee upfront or bill for our time can be an option that allows for some payment should a buyer buy a home without their agent. 

In a billable hour arrangement, when the buyer sees an itemized bill detailing all work and costs, they may ask their agent if they can switch over to paying for their compensation at closing instead. 

I think this setup would also prevent the buyer from running agent to agent. If they decide paying an agent for representation upfront is not for them, then at least it avoids disappointment, lost time, effort, gas and other costs spent on behalf of someone who likely would have never been loyal in the first place. 

It may also limit wasted time when buyers realize the random communication or haphazard offers on properties that don’t get accepted are costing them money. 

How do we unbundle professional services from NAR membership?

In the wake of the Sitzer|Burnett case and the leadership issues at NAR, several brokerages have stated that their agents do not have to belong to NAR if they don’t want to. However, electing not to belong is not easy to unbundle, and agents are left to determine what’s involved on their own. 

This is not about whether agents should belong to NAR or not; everyone will have to make their own decisions as to what is best for them. Since membership to NAR is tied to the state and local associations that you must join, an agent may simply not have a choice to ensure access to the tools and services they need to do business and, hence are forced into paying NAR dues. 

If sellers and buyers have choices about compensation and what they are willing to pay their agent, agents should also have choices about what organizations they wish to belong to. If they don’t feel they are getting a return on their investment from those organizations, they should not be forced to pay for things that aren’t providing value. 

Simply paying money to an organization doesn’t elevate someone’s professionalism. It is their individual skills, knowledge and abilities, along with their commitment to ongoing education and professional development, that shape that individual agent. There are many paths an agent can take to develop their career, regardless of what group(s) they choose to become part of. 

How will professional rules change in a post-NAR landscape?

As a result of some brokerages not requiring their agents to be members of NAR, and perhaps more to come, we have still not heard if NAR and state and local associations are willing to separate NAR membership as well as MLS access. 

Will MLS rules and regulations be strengthened to ensure all who participate in the MLS play by the same rules and address buyer representation agreements similar to solicitation of listed properties? If there are agents behaving badly, it will surely be a conundrum of who is and isn’t a member of NAR and possibly state and local associations that are all bundled into that. Not all agents could be found in violation of the Code of Ethics if they aren’t members of those organizations. 

Will membership still be required for state and local associations? Will there be different fee structures for accessing the MLS for association and non-association members? Some of this already exists depending on the market, MLS board and association(s) where you are located, but you must dig deep to figure it out and read the fine print.

How will rules of agency change?

Another issue that is still open is whether the rules of agency will need to be revamped to address the real possibility of more than one buyer going through a listing agent to make an offer on their listing. How will this be handled? What are the rules of engagement? Do agency disclosures need to be clarified, particularly “No Representation” disclosures so buyers have a clear understanding of what that means? 

Just because a buyer is going through the listing agent does not mean that the agent will represent them. They may facilitate, but their seller may not want them to provide representation. Buyers need to make sure they understand the difference when an agent prepares an offer for them to sign. 

I can see the next wave of litigation where buyers claimed that they had to go through the listing agent to buy a home because they couldn’t afford to otherwise, and they weren’t aware that the listing agent didn’t also represent them. Even if the listing agent was representing them, they didn’t feel they had anyone advocating on their behalf. Buyers will claim they were taken advantage of, paid too much, and there was lack of disclosure. 

As it is, there is already litigation regarding buyers claiming they paid too much to buy a home, known as the Batton 1 case. And for buyers who did compensate a buyer’s agent for representation, what is the fallout from that?

• Buyers claiming they paid too much for a home because they had to pay for representation and they didn’t feel they got what they paid for.
• The outcome of the negotiations wasn’t what they desired.
• The seller didn’t address all the repair concerns requested.
• They felt rushed to close.

Buyers don’t fully understand the rules of the road when it comes to working with agents on the buyer or seller side, and what those differences entail. While using buyer representation agreements may help make that distinction, up until now, they may have viewed them as one of the same. 

How will training education need to change in the days ahead?

While there has been a ton of training on explaining why buyer representation agreements are important, how to explain your services and demonstrate value, there is still a lack of training on the mechanics of how to request compensation utilizing a buyer representation agreement. 

A lot of this is addressed in the NAR Code of Ethics, but prior to the use of buyer representation agreements, most agents have not sought additional compensation when a listing was offering less, even though we have had that capability all along. Traditionally, it has been viewed as poor real estate etiquette to ask for more.

The industry needs better training in how and when you can request compensation and the best protocols to follow. In addition, if the agent and brokerage involved are not members of NAR and don’t have to abide by the Code of Ethics, you may have agents from two different planets negotiating a transaction. 

Further, if an agent hasn’t really been following what has been happening in the industry, they could find themselves up against a real roadblock. Ignorance can be a deal killer, leaving buyers to go through an ill-informed listing agent. 

While it seems obvious, not all purchase agreements currently in use have been modified to thoroughly accommodate buyer representation agreements and how compensation may be sought from the seller. Information is going to vary greatly and agents may not be getting the same message. 

It is imperative that all brokerages and Realtor associations provide ample and consistent training so agents are well versed in all aspects of utilizing buyer agency and other compensation agreements that could impact a transaction beyond just filling in the blanks. Potential potholes must be contemplated along with how best to address them. 

What can we learn from related industries?

Where does transparency stop and where does it start? Real estate-related industries have not been scrutinized as it relates to their compensation. Lending, title, escrow, builders, home warranties: Most of them can’t be negotiated with and the way the individuals are compensated should be just as transparent as real estate commissions. Since their services involve buyers and sellers, everyone should be held to the same standard of disclosure and flexibility. 

And of course, in the spirit of transparency, the total of legal bills tallied during all of this litigation should be disclosed by all attorneys involved, as well as what interest groups played a role, whether they were compensated for their input (and how much), the actual number of people who responded to the notices of the class action lawsuits as qualifying participants, and how much compensation they are receiving. That should be compared to what each and every attorney pursuing these cases receives from the settlements after all is said and done. After all, transparency is transparency.