Big mandated changes are coming to the home-buying process with new realtor commissions and real estate procedures set to change this week.

Spectrum News 1 sat down with Joe Rivellino, the president of the New York State Association of Realtors, to discuss what’s different and what it means for the buyer, seller and the agent.

Below is a Q&A with Rivellino, lightly edited for clarity.

Spectrum News: We are upon some changes being made in the home sales process nationwide due to the settlement of the Burnett v. National Association of Realtors lawsuit in early 2024. What does this mean for New York buyers and sellers?

Joe Rivellino: Change is coming, and Aug. 17 is the implementation date that is mandatory for the changes to take place. I would say, most of the realtors in New York have already put change in effect, but to remind you, the settlement agreement that NAR [National Association of Realtors] has entered into has two main parts to it.

Number one is that the agreement requires the multiple listing service, or MLS, to remove the ability for a listing broker to offer compensation to a buyer’s agent or buyer broker. So, in the past, the listing broker would take the listing and they would advertise on the multiple listing service what type of compensation and what amount of compensation the listing broker and seller have agreed to share with a buyer’s broker. And now that ability to see that in the multiple listing services has gone away. That’s one of the two conditions.

The other condition that affects realtors is that buyers are required to enter into written buyer broker agreement or compensation agreement with their agents prior to looking at or touring any home virtually or in person.

SN: As you lead your team and realtors across New York state what are you hearing? What are you seeing? Since you said, most brokers across New York state have already implemented changes.

Rivellino: Basically, the biggest change is for those brokerages that were not using buyer-broker agreements. And that’s a term that you’ll hear often going forward. You have a representation agreement. When you list a home, you sign a contract, you have terms, conditions, services, provided compensation, everything’s listed in the contract. And for the most part, different pockets of New York and in general, have or have not been using that same type of contractual agreement with their buyer clients. Those realtors that were not using that buyer broker agreement, now must use it, those that were using it, then this is really not a big change for those realtors.

SN: So, this mandatory buyer-broker agreement seems like a wonderful thing for the buyer’s agents. Previously, many buyers appear to have a realtor take them to a lot of homes and never end up using that realtor in a purchase so that realtor did not get paid.

Rivellino: Absolutely those things happen, and depending on the training of the agents, some agents are more willing to run around and hope, and others are more in tune with I am going to get this in writing. I’m going to have a contract with you. These are my services going forward. I don’t believe it’s a negative to have these contracts with our buyers. The truth is, we need transparency in commissions.

We need transparency in how everyone gets paid. In the past, you would see buyers agents possibly stating that the buyer doesn’t have to pay them. There’s no compensation. I work for free, type of thing, and that is inaccurate. Buyer’s agents were getting compensated a different way. And so this brings that way out, and it secures your relationship with your buyer client. It gives the agent the opportunity to shine. Show their value, show their services. Talk upfront about all your charges and the way that you’re going to get compensated. What you’re going to do to earn your money. We work hard for our money. So very hard.

SN: OK, so what about the buyer? Does this mean the buyer pays their agent thousands up front?

Rivellino: Great question, and that leads me into the other portion of this settlement, and that is, commissions are negotiable. They always have been. This puts it facing forward. So, when I sit with my potential buyer client, I have my buyer consultation. I share with that buyer all the things, from finding a home, contract to close, that I’m going to do in every step. Now, I can share all of that which I do, and to put a price of what I am worth on that contract and the time to negotiate that is right then and there. During that consult. So, if a buyer thinks that there’s a different opportunity, or want a different pay structure, retainer fee, a flat fee, a percentage of a sale price, an hourly rate. That’s all fine. Whatever the buyer and the buyer agent brokerage agree to is what you put in that compensation agreement.

SN: What are you seeing is the most popular option for the buyer, and what’s the most your favorite option for you and your brokers?

Rivellino: It’s a case-by-case scenario. Honestly, when I sit with first time buyers that may not have the reserves to pay for commission, then I’m obviously not going to push that my compensation is an upfront fee that you must put in an escrow. So, it really is negotiable. I don’t have a favorite. My favorite is finding the home, getting the buyer client into that home, and having the success of closing that transaction.

SN: Is this adding to a perfect storm? How is this affecting housing shortage?

Rivellino: In all fairness, I personally don’t believe that this NAR settlement is going to affect the inventory or the lack thereof of homes. This is strictly about how agents are transparent and how we’re getting paid. And if I have an agreement with you, to work with you as a buyer, show you properties, engage in transactions, negotiate on your behalf, and find you a property. The agreement that you and I have, typically depending on the agreement, but typically that allows me to also seek all or a portion of the compensation that you and I agreed to from the listing or selling side of the transaction.

So, it doesn’t guarantee that you personally have to pay me. It does guarantee that I will get paid one way or another, but it can be from multiple different ways, and when we engage in a contract on a property, then there is the opportunity for me as your agent and you to decide to put my compensation request into that purchase and sale agreement, and the seller still has the right and the option to compensate the buyer broker.

It doesn’t mandate that all buyers now must cash out of pocket pay for their representation. It just simply dictates how that compensation might get paid.

SN: What do people need to know that have been looking for a house for at least a year and a half?

Rivellino: That as of Aug. 17, existing purchasers that are working with agents must re-up their relationship with those brokerages. And those agents include this written compensation and buyer broker agreement that it’s mandatory, there’s no way around it. In that agreement, the buyer will then understand further how I [the agent] get paid as a buyer broker and how that can be negotiated going forward. I do not believe that buyers really think that agents that represent them work for free. They know that we’re getting paid. They just weren’t necessarily made fully aware of how they were getting paid.

Now this, and it’s a great thing, and now everyone is transparent about how that works. The agreement that you sign as a buyer with a buyer agent is going to have compensation, it’s going to have the length of time that the contract is good for, full disclosure of the fees and where they come from. It could also be a non-exclusive representation agreement where I agreed to show you this one property or these two properties that you have in mind, and we list those properties on that agreement, and then we show those properties only. If we decide to go further and look at other properties, we enter into another agreement, either exclusively for a bulk of things or non-exclusively, again, for specific properties. So, it’s rather simple, actually.

SN: What if you agree to show your buyers five house and they don’t close on any of them?. They still need to pay you. What happens then?

Rivellino: Depending on your compensation agreement, which is negotiable. So, I might say, hey, Lacey, you know what? I charge by the hour to show you homes. And if I go show you five homes at an hour a piece, you owe me five hours of work at whatever rate I choose you and I negotiate. On the other hand, I would say, and I’m not quoting other broker’s fees, but I would say a majority of our agents work off of [only being compensated for] a closing rather than a showing.

The bigger twist in this whole settlement is that sellers have possibly been somewhat misinformed about the way they are now responsible to pay commissions. So, you have two sides to a transaction. You have a seller side and you have a purchasing side. And there’s always been the opportunity for two ways to get compensated. Now sellers typically, when they talk with their listing agent at the time of the listing, have been told, ‘Hey, list with me, my fee is X percent. And out of that payment that you give me, should an outside broker or another broker sell the home, I’m going to share a portion of that with that other brokerage, and I’m going to post what that percentage or portion, or whatever it is, in the multiple listing service’ [MLS].

Well, now the seller doesn’t necessarily have to offer any compensation, not that they had to before, but it’s more transparent. So, if they don’t want to offer a compensation to a buyer side, they only want to pay the listing side, then so be it. And then, because the mandatory buyer broker agreement is in place, buyer’s agents that go look at that property already know or should know by calling the listing agent if there’s an offer there or not. But regardless of that, I can still, as a buyer’s agent, say to the seller, here’s the offer for X dollars, and out of that X dollars, I would like you, Mr. Seller, to compensate me for whatever amount I’m asking for. And they have the option to say, yes, no, maybe negotiate high, low, add more money, whatever they want to do.