Adapting to New Buyer Representation and Compensation Agreements

Among the biggest shifts for agents post-settlement is the requirement to use written buyer representation agreements that include compensation terms. While many top agents were already using buyer-broker agreements, it’s now essentially mandatory in Realtor-affiliated MLSs when working with buyers. Let’s unpack how to adapt to this change. We’ll cover what needs to be in these agreements, how to handle various scenarios (from VA loans to dual agency), and why, ultimately, this can be a positive for professionalism. Think of this as a quick guide that could save you a headache on your next deal – and something you’d certainly encounter in any real estate license renewal course about brokerage relationships.

Why Written Agreements Are the New Norm

After the NAR settlement, a new rule took effect: MLS participants working with buyers must have a written agreement with the buyer before touring a property nar.realtornar.realtor. The reason is to ensure the buyer fully understands and agrees to how their agent will be paid. In the past, a buyer could go from first showing to closing without ever signing anything with their agent (in some states). Now, at minimum, when you’re ready to start showing homes, you need that agreement in place.

Several states already had this requirement (for example, Tennessee and Colorado long required agents to establish agency via a written document early on empirelearning.comnar.realtor). The settlement basically made it a national policy for Realtors. If your state law has an existing rule, you follow that (the NAR rule defers to any state-specific law that might differ) nar.realtor. If your state forbids certain compensation arrangements (like Louisiana historically barred brokers from directly charging clients in certain ways), you’d align with state law nar.realtornar.realtor. But generally, no state prohibits having a written agreement – many encourage it.

What Must the Buyer Representation Agreement Include?

NAR has outlined a few must-haves that should be in every buyer-broker agreement now nar.realtornar.realtor:

• Specific Disclosure of Compensation: The agreement needs to state what the agent will earn or how it’s calculated. For example, “Broker will be paid 3% of the purchase price, or $X, by the buyer or by the seller or a combination as agreed.” If you don’t know the exact number (maybe you’re okay with whatever the MLS offered historically), that’s not sufficient anymore. It can’t be open-ended like “we’ll take whatever the seller gives.” It has to be a concrete figure or formula – e.g. “3%” or “$5,000” or “$200/hour” etc. nar.realtor.
• No Open-Ended Terms: The agreement cannot say something vague like “Broker’s compensation shall be whatever the listing broker offers in the MLS.” That kind of clause is now explicitly not allowed nar.realtornar.realtor. The amount has to be objectively ascertainable and agreed upon at the outset. You can say, for instance, “3% or $X, whichever is greater” or some clear method, but you can’t leave it entirely up in the air. In practice, many agents are choosing a percentage that they consider their standard, and the agreement reflects that.
• Cap on Compensation from Other Sources: The contract must state that the broker will not receive compensation from anyone else above what the buyer agreed to nar.realtornar.realtor. This means if you agreed on 3% with the buyer, and a seller later offers 4%, you can’t keep the extra 1% unless you go back and amend the agreement with the buyer’s knowledge stellarmls.comstellarmls.com. Most boilerplate agreements now include language like “Broker shall not receive compensation from any source in excess of the amount stated herein, without Buyer’s written consent.”
• Commission Negotiability Acknowledgment: A bold or conspicuous note that commissions are negotiable and not set by law nar.realtor. This might already be in some forms, but NAR wants it prominent. It’s about making sure the consumer knows they could have negotiated a different rate or fee.
• Services Provided: While not a new requirement, a good agreement spells out what services the broker will perform. Many state Realtor forms list duties or allow the agent to outline scope (like the duration of the agreement, geographic area, etc.). NAR’s emphasis is on transparency, so it’s wise to ensure your agreement (or an attached brochure) explains what you’ll do for the buyer. They should not be left wondering, “Why am I paying this fee?”

Most state Realtor associations have updated their buyer representation agreement forms to comply with these new requirements. It’s a good idea to use the latest form. For example, the California Association of REALTORS® (CAR) rolled out a new “Buyer Representation and Broker Compensation Agreement” in late 2023 in anticipation of these changes – it includes specific compensation terms and disclosures (and CAR even made it so it could double as an addendum for older buyer agreements to retro-fit the required terms) law.buffalo.edu.

Handling Different Scenarios

Agents often ask: “What if…?” Here are a few scenarios with tips:

• If the buyer attends an open house or new build site alone: The rule is triggered when you are “working with” a buyer and “touring a home” with them nar.realtornar.realtor. If your client pops into an open house solo, they don’t suddenly need to whip out an agreement. NAR’s FAQ clarifies no written agreement is needed if a buyer is just talking to a listing agent at an open house or casually inquiring nar.realtornar.realtor. But if you plan to go with them to an open house or show a FSBO, you should have the agreement signed first. Pro tip: Get the agreement done at your buyer consultation, well before any property visits. Don’t wait until you’re in the driveway about to tour a home – that’s awkward.
• Rentals, Commercial, etc.: As discussed in the previous post, these rules are aimed at residential sales. Rentals are generally exempt (no required buyer/tenant agreement for showings) stellarmls.comstellarmls.com. Commercial deals typically involve separate practices and are not covered by this settlement. Vacant land or multi-family above 4 units also fall outside the strict requirement. However, nothing stops you from using a written agreement in those cases too – many commercial brokers always use engagement letters. But if you purely do rentals or commercial, the NAR policy isn’t forcing a change on you like it is for residential buyer agents.
• Dual Agency or In-House Transactions: If your brokerage ends up representing both sides (or you as a dual agent), how does the compensation agreement work? The buyer’s agreement is about what the buyer’s broker gets. In a dual situation, often the listing and buyer side commissions might be adjusted. The key is disclosure. If you have a buyer who agreed to pay you 3% and you also are the listing agent, you’d likely have the listing agreement saying the seller pays 3% to you as listing broker. In dual agency, typically the total commission might already be set; you wouldn’t double-dip beyond that. Ensure the buyer knows if any portion of their broker fee is being covered by the seller in that case. In some states, dual agency with compensation from both sides is routine; in others, it’s tricky. NAR’s FAQ indicates the requirement for a written agreement does not disappear in dual agency – you still need one, but obviously the terms might say something like “Broker’s compensation to be paid by seller via listing agreement” if that’s the arrangement nar.realtornar.realtor. The main goal remains: the buyer knows what you’re getting.
• Buyer with VA or FHA loan (no buyer-paid commissions allowed): A known issue is that VA loans (and some other government loans) prohibit the borrower from paying real estate broker fees – it was always structured so sellers paid. NAR is actively looking at this, but for now, if you have a VA buyer, how do you have them sign an agreement saying they might pay you? Here’s a strategy: The agreement can state your compensation (e.g. 3%) and also state that you expect the seller to pay it and the buyer’s obligation to pay is contingent on it being permitted by their loan program nar.realtornar.realtor. In practice, with VA buyers you’ll write offers asking sellers to pay your commission or incorporate it into closing costs. NAR is working with regulators to find solutions so VA buyers aren’t disadvantaged nar.realtor. Until then, handle it on a case-by-case basis – perhaps add a clause in your agreement like “If Buyer’s financing program prohibits Buyer from paying Broker directly, then Broker agrees to seek compensation from Seller or listing Broker. If none is offered or available, this agreement may be terminated by Buyer.” Always consult your broker or attorney on the exact wording.
• What if a seller offers a bonus or a higher amount than my agreement? As mentioned, you can’t accept more than what the buyer agreed to without revising the deal stellarmls.comstellarmls.com. Best practice: If a listing is advertising a juicy bonus (say an extra $5,000 to the buyer’s agent for closing by year-end), discuss it with your buyer. One approach – pass the bonus to your client in some form (like a credit) or get their blessing to keep it by explaining it’s effectively a seller concession tied to you. Many agents have decided that if they negotiated, for example, a 2.5% fee with a buyer, and some listing is offering 3%, they either lower the buyer’s closing costs by that difference or use it to sweeten the deal for the buyer (which can help them win the bid). In any case, document any changes with an amendment to the agreement so there’s no confusion.

Benefits of Embracing Written Agreements

While some agents initially felt this was a burden (“Ugh, another form to get signed!”), there are silver linings:

• Professionalism: Having a buyer consultation and agreement signing can elevate your professionalism. It gives you a chance to set expectations, show your value, and secure the client’s commitment. Many top producers treated buyers like listings (with formal agreements) even when not required, because it weeds out tire-kickers and ensures loyalty. Now everyone is pushed to do that, which could mean fewer instances of agents working for months with a buyer only to have them disappear or switch agents.
• Clarity for the Client: Clients know what to expect. No more last-minute “by the way, our brokerage charges a transaction fee” or surprises about payment. Everything is laid out on day one. This builds trust. As NAR noted, written agreements help consumers understand the roles, services, and fees from the start nar.realtornar.realtor.
• Negotiation Tool: If a buyer balks at, say, a 3% fee, that opens a conversation. Maybe you agree to 2.5%, or a rebate if the sale price goes high. It’s better to hash that out upfront than to have an unhappy client later. Also, you can point out that commission is negotiable (which you’re required to, by the way) and that you’re willing to find a solution that works for both. It shows flexibility.
• Opportunity to Demonstrate Value: Sitting down to go over the agreement is the perfect time to present your buyer’s agent value proposition (similar to a listing presentation). You can walk them through the contract and simultaneously through what you’ll do for them. For example: “This section says what services I’ll provide: let me elaborate on those. I will … [explain each].” By the end, the buyer should feel confident signing and even more confident in your abilities.

One more thing: be prepared to answer the question, “What if I don’t sign this?” If a buyer hesitates, explain that this is now standard practice and in their benefit to formalize the relationship. If they outright refuse to sign any form of agreement, that’s a red flag – you might be dealing with someone who isn’t serious or wants to play the field with multiple agents. Given the new rules, you actually shouldn’t show homes to that person without an agreement, so you’d have to respectfully step back. Brokers are advising agents to get comfortable with potentially walking away if a prospect refuses to sign after you’ve explained it. It’s similar to how a listing agent wouldn’t list a home without a listing contract.

In Summary

Adapting to the buyer representation and broker compensation agreement requirement comes down to incorporating it into your routine. Update your buyer intake checklist: (1) initial consultation, (2) agency/compensation agreement signed, (3) start home search. Use the standard forms provided, and add any extra clauses needed for your situation (with broker guidance).

Think of this as leveling up the buyer side of the business to the same formality as the seller side. Yes, it’s change, but it’s one that can protect you and clear up misunderstandings. If you haven’t already, consider taking a short training – many associations offered webinars on implementing the new buyer broker agreements. Even a quick read of NAR’s “Quick Guide to Practice Changes” nar.realtornar.realtor or a refresher from a real estate CE course on brokerage law can ensure you’re covering all bases.

By embracing these agreements, you’re not only staying compliant – you’re also likely to have more committed clients and smoother transactions. In a business built on relationships and trust, that’s a win-win.

Sources:

• National Association of REALTORS® – What the Settlement Requires in Buyer Agreements nar.realtornar.realtor
• NAR News Release – New Rule: Written Agreements with Buyers nar.realtor
• Stellar MLS FAQ – Buyer Broker Agreements and Rentals stellarmls.comstellarmls.com
• REALTOR® Magazine – Summary of Practice Changes nar.realtornar.realtor
• Rhode Island REALTORS® – Overview of Settlement and New Requirements rirealtors.orgrirealtors.org

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