Purchase agreements and other real estate forms change in MN on August 1st, 2024.
After August 17, 2024, significant changes will affect buyer's agent commissions in Minnesota due to a settlement involving the National Association of Realtors (NAR). These changes are designed to increase transparency and alter some existing commission structures. In Minnesota, the forms REALTORS use for home buyers and sellers will change on August 1st, 2024.
Here are the primary points (sourced from www.nar.realtor):
Written Agreements for Buyers: Buyers will now need to sign written agreements with an agent before touring homes. This applies to both in-person and virtual tours. The representation agreements will clarify the services provided by the agent and associated costs. This ensures that buyers understand the compensation structure and services offered by their agents. The shift creates a direct financial relationship between buyers and their agents whereas before, buyers and their agent typically relied on sellers to pay the buyer’s agent. Buyers will continue to interview agents and may need to pay for their agent's services separately, which could involve upfront payments or other payment arrangements. This change encourages buyers to shop for agent services before touring homes and agents will need to clearly articulate their value proposition (experience, education, market knowledge and service offerings) associated with representing buyers.
No More MLS Commission Offers: Sellers will no longer authorize their broker to offer commissions to buyer’s agents through the Multiple Listing Service (MLS). This means that the previously common practice of brokers advertising a commission for buyer’s agents on the MLS listings will be discontinued.
Buyer Broker/Agent Compensation Structure: Offers of compensation will continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals.
The types of compensation available for buyer brokers would continue to take multiple forms, including but not limited to:
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Fixed-fee commission or commission as a percentage of sales price paid directly by consumers
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Concession from the seller negotiated by the buyer and seller in the purchase agreement
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Portion of the listing broker’s compensation paid to buyer’s agent
Compensation amounts always have and will continue to be negotiable and be a part of the representation agreement terms between brokers/agents and the consumers they represent as clients.
Increased Negotiation: The new rules open up more layers of negotiation between buyers, sellers, and their respective agents. Sellers may still choose to contribute to buyer agent commissions. However, these arrangements will no longer be communicated through the MLS.
Consumers purchasing with lender financing will work closely with the lender and their real estate agent to determine best strategies for negotiating the compensation paid to their agent.
These changes aim to promote a more transparent and equitable real estate market by ensuring that all parties are fully aware of and agree upon the compensation for services rendered in the home buying process.
The Bottom Line: For the home buyer, relying on the professional services of a buyer’s agent is more critical than ever before. Research and determine up-front what services you desire. Analyze how a real estate professional delivers those services (and at what cost) and have a game plan on how, and by whom, your buyer’s agent will be compensated.
For home sellers, understand that market demand may change with these new rules in place. It will be essential for home sellers to work with agents that have a thorough understanding of these changes and how to market and negotiate under these new rules.
Sarah Marrinan of Engel & Völkers is a local Twin Cities resident and on the board of directors for the Hugo Business Association. As a Certified Residential Specialist with multiple additional real estate designations, certifications, awards and experience, Sarah would love to share her knowledge and expertise to help you navigate these changes and have the best possible real estate experience.
