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Industry changes set to take effect next month as a result of a commission lawsuit settlement will change the way agents conduct day-to-day business.
However, even though the NAR settlement was reached four months ago, it remains unclear exactly how practices will change.
After the terms of the settlement take effect, especially after commissions are decoupled, some marketing techniques that are not uncommon in the luxury industry may be viewed in a new light.
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For example, will a selling agent still be able to host lavish brokerage houses and open houses filled with Dom Perignon, caviar and pool “mermaids”? Will luxury incentives to the buyer’s agent, such as a brand new Mercedes Benz or a $30,000 cash bonus, be considered compensation? And, most importantly, do the new regulations allow these tactics?
Most luxury agents Inman spoke to were unsure how the new commission rules would affect the over-promoting of eight-figure properties that many people see. But NextHome CEO James Dwiggins has been outspoken about the changes on social media and in his podcast, telling Inman any The type of compensation for the agent must be specified in the buyer’s agreement with the broker.
“While I am not an attorney and have little experience in the luxury real estate field, it is clear to me that you cannot ask for or accept any type of compensation that exceeds the agreed upon terms of the Buyer Representation Agreement,” Dwiggins wrote to Inman. .
“Agents would be wise to have very clear policies with their agents to avoid being sued. Of course, if this becomes a big issue, expect attorneys to sue for another payday, and even the Department of Justice to get involved. I can also tell you with 100% certainty that brokers and agents do not want the federal government to put unlimited budget pressure on them…the risk is not worth the reward.
Inman, the luxury agent interviewed, believes that large open houses and buyer agent benefits will continue to be popular with luxury sellers, but that will change. Others prefer not to speculate. Here’s how opinions change.
Not much will change
Beau Blankenship
When a luxury client needs to sell quickly for whatever reason, they will do whatever they can to make it happen. One of the ways they accomplish this is by offering buyer’s agents bonuses in the form of cash or high-end assets like cars for bringing qualified buyers to the closing table within a certain amount of time.
Just ahead of the April 2023 ULA tax on properties priced at $5 million or more, agents in Los Angeles are quickly seeing this in practice. was similarly motivated. He doesn’t expect that to change.
“I still think we’ll see sellers pay [buyer-agent bonuses]”, Engel & Völkers Blankenship Group team leader told Inman. “I don’t think we’ll see it go away. I think it’s going to be difficult to get buyers to show homes without central compensation. I could be wrong. Yes, but that’s just my opinion.
Not sure how this will work in the future
Danny Brown of Beverly Hills-based Compass says he has been invited to thousands of Coachella or Playboy Mansion-style open houses during his career in this luxury haven. But at the ultra-luxury level, customers often know exactly what they want, when they want it, and how much they’re willing to pay for it. Additional incentives offered by the seller to the buyer’s agent may not make any difference.
Danny Brown | Compass
“There’s a lot of smoke and mirrors that provide these important incentives,” Brown said. “Because our buyers will decide what kind of home they want to buy at the ultra-high net worth level, I’m not going to convince my buyers to buy something they don’t like because they’ll give me a Ferrari. That’s for 0 % is very important.
But, Brown added, he doesn’t know what level will be allowed in the future for sellers who actually want to put a $200,000 bonus in front of a buyer’s agent who can close the deal quickly.
“I’d have to dig into this and talk to my compliance department because that’s a good point – they probably won’t allow it because they’re going to think it’s some kind of guidance or influence,” Brown said.
“We are in brand new territory, uncharted waters, no one knows what to do or how it will develop,” he added.
Agents will double down on their exaggerated moves — and make adjustments
Geoch House | The Oppenheim Group
“I’m actually going in the other direction,” Oppenheim Group’s Gio Helou said when asked if he thought there was a need to curtail the flashy open houses he’s known for on television. OC for sale. (Helou is also famous for throwing herself a party after sales hit $100 million, featuring a life-size ice sculpture.)
“It’s going to be more over-the-top than ever,” the luxury agent told Inman, describing the upcoming open house event with a champagne bar, sumptuous food and music that he believes will reflect the home’s contour.
One adjustment Ho House made at its open houses was to require potential buyers who attended but were not actively working with an agent to sign a contract specific to the showing of the home. However, he believes it won’t impact how much money he can invest on opening day.
Ben Bacal of Side-backed Revel Real Estate agreed that lavish initiatives such as grand open houses and buyer agent gifts will “definitely” continue.
“If the seller wants to do that, that’s their prerogative,” Bakar said. “This is our trustee [duty] Give them the information and they can make a decision.
Ben Bakar
Bakar added that brokers are only required to disclose bonuses and other incentives through channels other than the MLS. Bacal himself promotes commission reimbursement offers using the home discovery social app Rila, a crowdsourcing marketplace Bacal developed in 2019 that allows agents, buyers and sellers to discuss listings together.
Recently, agents in the greater Los Angeles luxury market have had to deal with the challenges they face, from the ULA measure that took effect more than a year ago, which added an additional transfer tax to sellers of properties selling for $5 million and above, to insurance coverage. issues of scope and the recent increase in crime rates.
Paul Salazar of Hilton & Hyland says these are all reasons why agents in the market are more willing than ever to collaborate and make things easier for each other.
Paul Salazar | Hilton and Hyland
“There’s a lot going on that’s not good for the industry right now, and we’re seeing a lot of agents having conversations and working together,” Salazar said. “We have conversations like, ‘Hey, this is how we should continue to move forward and help consumers and keep this industry alive and growing.'” So I think you’ll continue to see buyers [agent] Incentives.
Salazar said he expects disclosures of all these incentives will be added to updated listing agreement forms being developed by the California Association of Realtors, or at least they will need to be added as addendums to the contract.
“I think it’s all about disclosure,” said Erin Sykes, chief economist and real estate wealth advisor at Nest Seeker International.
She said she doesn’t expect opening houses to change much after commissions are decoupled, but three different versions of buyer’s agent agreements already exist in Florida, including preliminary agreements on buyer’s agent fees. If any change occurs, compensation will be provided and another new contract will be signed.
Erin Sykes, Nest Seekers International
If the seller is generous enough to hand over a Mercedes to a buyer’s agent who can help close the deal in a short period of time, Sykes says the issue may just need to be resolved with some kind of disclosure form that includes a value. .
But she also said she thinks the entire process will likely go through multiple iterations before being standardized.
“I think the document is going to change a few times before we finalize it,” Sykes said.
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