New U.S. buyer broker compensation scenarios

In their midyear real estate forecast, Realtor.com says that it has been a tough year for the housing market. High mortgage rates, stubborn home prices, and sluggish sales—all of these are contributing, but things might be finally looking up. They suggest that the next 6 months will bring relief to homebuyers and sellers with lower mortgage rates. Given that yearly price growth cooled to 2.9% last month, dipping below 3% for the first time since March 2021, the door might be open for lower rates soon. However, per Bloomberg, shelter prices remain the biggest hurdle to bringing the annual rate down to the Federal Reserve’s target of 2%.

Another interesting factor is the new buyer broker compensation situation. If you aren't familiar with the NAR settlement, check out this previous post: An Update on the NAR Settlement and its Upcoming Changes. Now, let's consider some of the situations from the most recent article from WERC: Industry Insights on U.S. Buyer Broker Compensation Scenarios, Part 1. They have created a number of scenarios and professional insights across various industry sectors. Here's how each might affect global mobility processes. 

1. Scenario One: We might label this example as “Mind the Gap”! In this scenario, the transferee signs a buyer representation agreement (which everyone now has to) and the seller is either only paying a little bit towards to buy agent commission or nothing, creating a gap where the buyer will need to pay their agent. For relocating employees in this situation, the company needs to consider whether to provide support. They can choose to have the employee cover the buyer broker cost, suggesting maybe that the Miscellaneous Allowance can help to cover the expense. They could also decide to cover some or all of that cost as either an exception or by making a policy change. As a reminder, if companies do pay or reimburse something for these buyer agent commissions, that is a taxable expense that would either need to be grossed up or have taxes deducted via payroll. Most companies are likely to add in the gross up too.
2. Scenario Two: This one might be called, “Tough luck” or “Too bad, so sad”. This scenario is basically when the company is not going to cover any buy agent commission costs for their transferee. A company might do this if there is a chance that when this buyer sold their old home, they may have saved funds by not paying full buyer agent commissions. The risk is a tough employee experience with a negative impact on employee satisfaction and increased time and effort required for the relocation process. The key here is to make sure the employee is well educated on the guidelines. Handling home purchases this way may also make it difficult for an employee to accept a relocation, adding to relocation reluctance.
3. Scenario Three: This scenario could be labelled, “Just say no…to moving”. In this scenario, the employee indicates they will decline moving if they have to pay the buyer agent commission. Mobility programs would then need to decide whether the company is willing to make an exception. They'll need to consider this person's future value to the organization, the costs already sunk into recruiting and hiring, and the fact that this issue may come up again for the next candidate/hire.

Hot off the press, WERC has followed this first release up with: Industry Insights on U.S. Buyer Broker Compensation Scenarios, Part 2. Here are the additional scenarios they run through:

• Scenario Four: This is the “More is Better” scenario where the relocating employee signs multiple buyer representation agreements! This could happen because an employee looking at properties in different states covered by different brokerage firms may need multiple agreements. “However, transferees should avoid signing multiple agreements for the same area and understand any “protection period” clauses in the agreements.” Generally, this should not happen, but if a second agreement is necessary, a release from the first broker is required before proceeding. A reputable relocation-certified agent would ask if the employee has signed another representation agreement and act accordingly. Communication and advising will be more important than ever!
• Scenario Five: This can be labelled, “The DIY Employee". It's when the employee decides to navigate the home buying process without a buyer agent, relying instead on legal counsel or coordinating the purchase alone. It is probably obvious that there is a lot of risk in this scenario. Risks include property scams and breaches of fair housing laws. Typically, corporate policies won't cover buyer closing costs unless a referred broker is used. It would likely limit access to the full market of homes for sale. 
• Scenario Six: We'll label this one, “multi-state chaos”, for when the area the employee is considering crosses over numerous states and could require multiple brokers. The key here is again that the employee not sign agreements where two of them would cover the same areas. Varying “normal and customary” practices will exist, so the best option is for the employee to be assigned to a real estate firm that can accommodate multistate searches and modify buyer’s agent agreements accordingly. WERC points out that the cost of buyer brokerage commissions can/will vary significantly by state or local jurisdiction. 

There are likely many additional scenarios to consider. We'll probably be seeing some creative solutions over the remainder of the year. Hopefully these scenarios give you some ideas of what to expect, so you can consider in advance how your program should respond!

WERC also did a survey looking into how corporate mobility programs were considering handling the change in commission payments. This included information on paying both buyer and seller agents. Their goal was to help advise on:

• What are organizations’ current mobility practices?
• How do organizations plan to handle buyer agent compensation following implementation of the NAR process changes?
• How do organizations plan to handle cases where transferees have responsibility for buyer agent compensation?

You can access those survey findings here: WERC Survey: How Organizations Are Responding to NAR Changes