Rules About Broker Compensation Are Changing -- Everywhere

Broker compensation is not going away, but it will be handled in a different way than has been the previous long-established practice.  

As of August 13, 2024, revised California REALTOR forms for residential real estate are going into effect, as well as the way listings are entered into CRMLS.  These changes are the result of a nationwide settlement entered into between the National Association of REALTORS and the Department of Justice as the result to lawsuits which were filed in other states.  "To remain compliant with the settlement, CRMLS must remove all compensation fields from the MLS. Compensation negotiations will not be allowed in the MLS in any way, shape or form." - CRMLS.   Because compensation is being removed from the MLS, it is handled separately in one of the following ways, or a combination thereof:

     a) when the buyer includes a term in the offer stating the Seller will pay the Buyer Broker fee. Assuming the seller agrees, the Buyer Broker fee becomes part of the complete purchase agreement. Additionally, if using the C.A.R. Residential Purchase Agreement and Joint Escrow Instructions (RPA), the payment would also become part of the Escrow instructions.

    b) when the buyer directly compensates the buyer agent, i.e., per terms in the C.A.R. buyer/broker agreement required to be in place prior to an agent showing property to a buyer, a requirement as of August 13, 2024.

    c) or compensation from the listing agent (not made through the MLS).

This is not a practice change only in California, it is nationwide for all REALTORS that entered into the settlement, which is more than one million National Association of REALTORS members, MLS members and other qualifying brokers.

REALTORS in California have always used a listing contract which explained how compensation occurred, and will continue to do so. A seller should expect to get a clear understanding as well under the new practices when they are contemplating selling their property and going over a listing contract. 

The same holds for buyers who are now required to enter into an agreement with their brokers -- additionally, it's anticipated that this will become a California state law in 2025.

Julia Huntsman, REALTOR, Broker | http://www.abodes.realestate | 562-896-2609 | California Lic. #01188996