Buying a house is stressful! With any relocation, there are time constraints. Employees typically only have one home finding visit and need to make decisions quickly about housing. Interest rates are higher than what they may have had in the past. Combined with increasing prices, affordability has been an increasing challenge for employees to accept a move. With new rules from the National Association of Realtors (NAR) anticipated to be in effect by mid-August, employees will need to contend with another challenge – the potential added cost of the buyer’s agent commission.

What are the Upcoming Changes

You can find a detailed summary from Cornerstone here, but in a nutshell, NAR’s new rules require commission offers to be removed from NAR-affiliated Multiple Listing Service (MLS) listings and require clear written buyer agency agreements that outline the compensation that will be due to the buyer’s agent. It should be noted that MLSs that are not affiliated with NAR can choose to opt out of the settlement. Similarly, there are brokers and licensed real estate agents who are not included in the NAR settlement or are not members of NAR who may choose to reject the proposed rules. To add to this complexity, some states are enacting laws around buyer’s agent agreements while in other states, buyer’s agent agreements may differ between brokerages. What this results in is an experience that could be vastly different between the departure and destination locations as well as between agents and listings.

What are the Impacts to Relocating Employees

Buying a home is not something that people do frequently, and most individuals don’t necessarily stay up to date on real estate practices. If they’re new to buying a home, they don’t know what they don’t know. If they’ve purchased a home in the past, they likely didn’t need to pay a commission. While buyer’s agent agreements are not new, they weren’t always used and may have had $0 compensation listed based on the expectation that the buyer’s agent would receive commission from the seller/listing agent. With the NAR changes, they may not understand that they are committing to buyer’s agent compensation should the buyer’s agent commission not be offered by the seller or able to be negotiated into the contract. 
Relocating employees may not understand that a buyer’s agent agreement is a contract with the real estate agent for the agreed-upon services. Relocating employees could inadvertently put themselves at risk by not understanding their contractual obligations under a buyer’s agent agreement, not understanding agent exclusivity terms, or signing an agreement for a lengthy contract period without termination options. This could result in working with an agent they’re unhappy with or even the potential liability of paying more than one agent.

Even if the employee is clear on their obligations, there may be anxiety regarding the potential requirement of having to pay an agent. If not paid by the seller, relocating employees may not be prepared to cover their agent’s fee as it is not financeable. As a result, buyer purchasing power could be impacted. Employers could see resistance to the relocation or delayed moves while the employee looks for another home. Relocating employees may also decide to forego the use of a buyer’s agent entirely and try to find, make an offer, and close on their own. This could make them less productive, but it could also put them at risk of overpaying for a home, not having appropriate inspections completed, or purchasing a home not eligible for a future relocation program. 
It's also important to note that while this primarily impacts relocating employees purchasing a home, similar issues will impact those who wish to rent properties listed through the MLS as opposed to rental complexes. Potential renters will be required to sign an agreement with the rental-finding agent to ensure that agent compensation is clearly documented and defined.

Supporting the Customer Experience

At Cornerstone, we set ourselves apart with our approach to supporting the customer experience. Regardless of whether an employee receives home sale, home purchase, or rental finding assistance benefits, we feel it is important to ensure our customers have an awareness of what they may come up against in the real estate marketplace.

Cornerstone firmly believes the foundation of a great customer experience is a knowledgeable Consultant. We have focused on ensuring our Consultants understand the complexities of the real estate marketplace and are prepared to educate relocating employees regarding the latest developments. Consultants begin coaching relocating employees on both the home sale and the home purchase processes starting from their first briefing discussion. For the home purchase process, they continue to coach on the possible outcomes for buyer’s agent commission through the relocating employee’s home finding visit, offer negotiations and closing.

Cornerstone has also created materials for relocating employees to provide an overview of the marketplace and to provide guidance on what to look for when working with a buyer’s agent. Combined with the expertise of their Consultant, your relocating employees will be well-informed and prepared as they head into their home search.

The Path Ahead

Cornerstone continues to monitor the changing real estate landscape. Formal court approval on the proposed NAR settlement, which sets forth the new rules, is not expected until November 2024. The U.S. Department of Justice (DOJ) has indicated its desire to “de-couple” real estate commissions but has not issued a final statement on the NAR proposal. In addition, there continues to be open litigation that may transform real estate practices further. 
Whatever the path ahead, Cornerstone will be there to support the relocating employee’s experience.