Clearing Up Misconceptions: Adjusting Buyer Agreement Compensation Is Okay

The real estate industry has seen plenty of discussion surrounding recent changes in National Association of REALTORS? (NAR) policies. Misinterpretations of these changes, particularly about written buyer agreements and compensation adjustments, have caused confusion. Let’s set the record straight: you can adjust the compensation terms in a buyer agreement, provided it’s done transparently and within the guidelines set by the NAR settlement and state law.

What the Settlement Really Says

At its core, the NAR settlement emphasizes clarity, transparency, and mutual agreement in all written buyer agreements. Here's what you need to know:

1. Amendments Are Allowed Written buyer agreements are like any other contract. If both the REALTOR? and the client agree to modify the terms, the agreement can be amended. This flexibility ensures the arrangement serves the best interests of both parties as circumstances evolve.
2. Specific Compensation Terms Are Required The settlement mandates that compensation terms in buyer agreements must be explicit and not open-ended. For example, terms like "whatever the seller is offering" are no longer acceptable. Compensation must be clearly defined and understood by both parties from the outset.
3. Prohibited Adjustments Amendments cannot be made simply to match whatever compensation the seller is offering. The intent behind the change must align with the original principles of the agreement, ensuring fairness and transparency.

Real-World Scenarios for Adjusting Compensation

There are many valid reasons why a REALTOR? might see the need to amend the compensation outlined in a buyer agreement. For example:

• For Sale by Owner (FSBO): When working with a FSBO property, the REALTOR? often takes on additional responsibilities, such as managing disclosures, contracts, and other tasks typically handled by the seller's agent.
• Limited-Service Listings: If the property is listed by a limited-service agent, the REALTOR? may be required to take on more of the workload, including tasks outside their usual scope.
• Switching to Land Purchases: A buyer might decide to shift from searching for a home to purchasing a much cheaper piece of land. This change can require more effort to identify and evaluate suitable properties.
• Short Sales: Transactions involving short sales are often more complex, requiring additional time, expertise, and negotiation.
• Expanded Search Areas: A buyer might get priced out of one area, such as Kona, and decide to look in a different, more affordable location, such as Hilo. This adjustment could mean more time spent traveling and managing the transaction across different markets.

These are just a few examples, but there are countless other scenarios where the REALTOR?’s workload or responsibilities increase/decrease, justifying a change in compensation.

Transparency Is Key

The settlement highlights that transparency is in everyone’s best interest. Any amendments to a buyer agreement must be fully disclosed and agreed upon by both the buyer and the agent. This approach not only aligns with ethical practices but also fosters trust in the client-agent relationship.

Addressing the Misunderstandings

Some in the industry have misunderstood these changes, incorrectly believing that amendments to buyer agreements are restricted or prohibited. This misconception stems from a lack of clarity about the settlement’s requirements. The truth is that adjustments are perfectly permissible, as long as they are made transparently and in compliance with state laws and the settlement’s terms.

Why This Matters

Written buyer agreements are designed to bring clarity to real estate transactions. By defining compensation and services upfront, both buyers and agents can avoid surprises and potential conflicts. And when circumstances require adjustments, having the flexibility to amend these agreements ensures they remain relevant and fair.

The Takeaway

The updated NAR policies are not about restricting REALTORS? but rather about creating a more transparent and professional environment. You can amend your written buyer agreements, including compensation terms, as long as you and your client mutually agree and follow the rules. This clarity benefits everyone involved—building trust, ensuring fairness, and upholding the integrity of the real estate profession.

If you're a REALTOR? navigating these changes, embrace the flexibility that written buyer agreements provide. And if you're a client, know that your relationship with your agent is built on mutual understanding and transparency.

By working together and adhering to these principles, both buyers and REALTORS? can enjoy a smoother, more transparent real estate process.