What is This Big Change in Broker Compensation the News Keeps Talking About?

In October 2023, a federal court in Missouri changed the structure of real estate transactions when it questioned the way that compensation to buyers' brokers has been traditionally handled.  As such, the 2023 Sitzer-Burnett verdict rewrote the rules of compensation and contract for brokers and buyers. 

In previous years, compensation for both buyers’ brokers and sellers’ brokers was often written into the Multiple Listing Services (MLS) posting as a set percentage paid by the seller and divided between the two brokers. Because of the Sitzer-Burnett verdict, as the National Association of Realtors (NAR) explains, “the offer cannot be shared on a Multiple Listing Service (MLS)”  and compensation for both the seller and buyer should be negotiated separately. 

The immediate and consequential change for buyers is that they will need to solidify both their relationship with and payment to their broker at the very start of their interaction. Brokers will provide buyers with a “Buyer Broker Agreement” before they look at a single property. The agreement will define the roles and responsibilities of the broker as well as allow the buyer to define the terms of the agreement. The buyer can make the agreement for a span of time or for a single property, as well as define compensation as a flat fee or a percentage. 

To a large degree, this change simply makes explicit what had previously been tacit. Indeed, many buyers and brokers have welcomed this change as helping demystify the real estate process and providing clarity for all parties involved. If you are a buyer working with a new broker, look forward to having a full and frank discussion about roles, responsibilities, and compensation, a talk that will make you stronger as a team moving forward.