KGCI: Real Estate on Air - New Contracts & Upcoming Changes

Episode Date: July 17, 2025

SummaryThis episode dives deep into the significant shifts impacting real estate, particularly the new contractual requirements and industry-wide changes stemming from recent legal settlements. We break down what these updates mean for buyers, sellers, and agents, emphasizing the mandatory buyer-broker agreements and evolving commission structures. Learn how to adapt to these crucial changes to ensure smooth transactions and maintain a competitive edge in the dynamic real estate market.Bullet Point TakeawaysMandatory Buyer-Broker Agreements: Understand the new requirement for written buyer-broker agreements before touring properties, effective from August 2024, enhancing transparency and defining agent-client relationships.Evolving Commission Structures: Explore the elimination of buyer agent commission offers on the MLS and the shift towards direct negotiation of agent compensation between agents and their clients.Increased Transparency: Discover how these changes are designed to foster greater clarity regarding agent services, compensation, and client responsibilities.Adapting to Market Shifts: Learn about broader industry trends, including the growing adoption of AI, changing buyer preferences, and the importance of sustainability in property development.Strategic Client Conversations: Gain insights into how agents must adjust their business practices to clearly communicate value and compensation expectations with buyers and sellers upfront.SEO Keywords/PhrasesNew Real Estate ContractsNAR Settlement ChangesReal Estate Commission RulesBuyer-Broker AgreementFuture of Real EstateCall-to-ActionStay ahead of the curve! Listen to the full episode on your favorite podcast platform to understand the critical new contracts and upcoming changes shaping the real estate industry.

And welcome to another edition of the nerdy agent podcast. I'm your host, Luke Pedersen with my brothers and fellow nerds, AJ and Josh here. It's been a while since we've been on. Welcome back. Welcome back. It's been a few weeks. Why don't you have the mixer, Luke, where it goes from? I know, we should have.

It's hard to have that button in front of me to press it. We also have the live audience. Are they not? Why aren't they sure? He had the live audience. It's just Kyle. Oh, geez. It's been a while, but we are coming back with debatably one of the most important

podcast we've probably had to talk about the new forms, specifically in the Minnesota market in regards to the lawsuit and the changes that are going to be coming on August 17th, August 15th, Minnesota is what it's going to be. And so we're essentially, I have some documents here. They just released all the changes they're making. And we're going to go through what changed on the buyer rep contract, what changed on the listing contract, and what changed on the purchase agreement, how that affects the agents and what they should be doing to successfully navigate this new marketplace. There's some other changes that have happened in here. I would call them probably nominal. So we're not going to cover those like the Cemetery Act, which is pretty

straightforward, I would say. To start, can you, so AJ, give us a rundown on the buyer representation contract changes. Well, so the only real change on that contract is that the the buyer's agent can or the buyer's broker can only earn up to the amount that's listed in that contract. So I know at least in Minnesota a lot of folks normally fill out how much is the agent making. And then it just they just put zero in there because that's from the buyer to the buyer's broker, knowing that there's going to be a co-opted commission on the MLS listed as compensation. So since that field is disappearing, now agents are going to be setting their buyer broker fee. upfront in that contract and they can only earn up to that amount. That's all that's

really changing in that buyer representation. Really important note on the biorep contract as well. If you don't know this, I don't want to throw anybody but anybody under the bus but wherever you're at currently isn't good enough and you should be switching either to a new brokerage or team but you will need to have one of these signed as well before touring a house. So you're going to have to have this conversation upfront and included in this buyer rep contract with all of your clients. And I think this is the one that everyone, if you've listened to our past podcast, when this all started, is most prepared for, right? Like we all kind of expected this would be how

this one played out. In my mind, it's the least confusing of the bunch. It's the most simplistic in terms of how this change is going to get put together in actuality. And so just, you know, know that alongside these contracts, having a listing presentation or a buyer's side presentation that you feel really comfortable with and that address these things head on is really important right now. So we've talked about, I mean, one of the big key themes is if you don't feel like you have good resources to be able to understand what we're going to talk about today, obviously listen to this, reach out to us, learn more about this stuff,

because it's going to become of the utmost importance once this all actually plays that, goes into practice. But at the same time, make sure that you're prepared to actually adjust your presentations, et cetera, to address this. So we're working on right now a new presentation that we're going to bring to all buyers. talking about these things so that they're aware on the front of exactly what is changing and how we need to address it with these forms. The second piece we wanted to go over was the listing contract, which is probably the most convoluted of the three. So go over kind of what that's looking like and what our plan is for that.

So, yeah, so right, you've got your, what are you talking with buyers about, right? And it's that compensation piece. And then it's like, how are you explaining this to sellers? There are three forms that I'm going to go over right now, one being the listing contract itself. So how our contracts have always read in Minnesota, at least since I've been doing real estate, is here's the total commission you're going to pay, and here is the co-opted commission that the listing broker is going to offer to a buyer's broker as part of bringing a buyer. So I'm not going to get into specific numbers, but let's say that that number was five, six, or seven bananas and the listing broker was offering a co-opted

commission of two, three or four apples to the buyer's broker that was considered a co-opted commission and this is like very important language that I think and we're training on this with our team at our team meeting after this very important to understand what co-opted commission means versus direct compensation.

So the fundamentally or semantically our contracts read X number of bananas, however many of those bananas get taken away and go to the buyer's broker, right? At our settlement statements, at closings on our settlement statements, me and Luke just talked about this, it's not really how it actually ends up playing out because the number of bananas being paid to the listing broker versus the buyer's broker is spelled out and split out. Now, in some states, and why this is important, in some states, that entire amount went to the listing broker who then cut a check after the closing to the buyer's broker. So there wasn't very good transparency into what that buyer broker was being paid. Whereas on ours, there's a lot of disclosure and transparency, and it's all over the settlement statement, right?

Did he usually, did the seller in that case usually, or the seller's agent usually give up like the browned bananas or the overly ripe bananas? This is a Tom Ferry thing. He always uses bananas and apples. It depends on if the buyer's broker wanted to make banana bread or eat the bananas and breakfast. It's a great difference. Exactly. So the key here is,

sellers still can pay the buyer's broker. Our brokerage is taking the stance that listing brokers cannot pay the buyer's broker. It is the seller that will be directly compensating the buyer's broker. So in our listing contracts, new forms... And this may vary from brokerage to brokerage. Totally. In our new forms, it says X amount is the total commission. And then it says, what's the next line on there?

There's the third line is the co-opted commission. Yep. Oh, yeah, sorry. The second line is how much will the total commission be reduced by if the seller directly compensates the buyer's broker? So in our forms, we would just set our listing fee as the total commission. Exclusive of, right, whatever, two, three, four, five bananas, whatever that is. Exclusive of the buyer broker compensation that the seller is providing.

and then we would put zero in the next box and not offering co-opted commissions. Now, there are two additional forms. Versus today, the way these forms work and everyone who's been had listings in the past, it says, we're going to give five bananas in total to agents. And then later in there, you say, I'm going to give two of those bananas to the buyer's agent. That is going to be changing. Right. Just to be clear.

Exactly. So specifically on our forms because of what EXP wants to do. Which is what I thought would happen all along is like, here's the listing. broker's fee and here's what the buyer broker fee might be, right? Directly from the seller. Correct. So that will read now in that scenario, that will read three bananas, just to be clear. Or four bananas.

Well, I said in the example I gave was five total to go to the buyer's brokerage. Now you would just say, now in this scenario it would say three bananas in this example. If you had negotiated that. Exactly. Now there's, there are two additional forms that are a part of this, right? So in the case that we're discussing of a direct compensation, there's an additional addendum in our state forms that says the seller is authorizing the listing broker to offer from the seller direct compensation to the buyer's broker of up to whatever amount. And then does the, does the, the seller says they are willing to do that. And then they authorize that broker to actually tell people that they're willing to do that.

and that compensation would be directly to the buyer's broker from the seller legally, semantically across the board, right? Whereas some of them will sign the other form when an offer is being presented, which is a co-opted commission. So if they had, in Josh's example, five bananas and two of the bananas, we're going to go to the buyer's broker as a co-opted commission, there's a form to submit with the purchase agreement that spells out what that number is. Does the first additional form that states it's directly from the sellers, is that going to be submitted with an offer?

Or is that going to be submitted with a listing contract? That will not be submitted with an offer. And that's because I'll get into this next thing, which is the purchase agreement. So that's going to be a part of the listing contract. Correct. It will be an addendum to the listing contract. The purchase agreement, however, has jammed this seller's direct compensation to buyers broker on the bottom of page eight, which me and me and my buddy, page nine. me and my buddy were talking about is insane.

I can't like they wanted this to be more transparent. That thing should be on the first page. Just hidden on 405. But that's where it is. It's slammed in there on line 405. And what it says is what's going to be the most confusing for everybody, especially if the listing agent is offering a co-opted commission. Do you want me to read it? Sure.

Sellers contribution to buyers, brokers compensation. Seller agrees to pay buyers, brokers compensation at closing, blank percent of the selling price or blank dollar. which in addition to any seller's contributions, which is in addition to any seller contribution to buyers closing costs paid at closing, this amount is in addition to the listing broker's offer of cooperating compensation, if any. So that's where it gets super confusing

because in the first case that we were talking about with our brokerage, where we're not technically offering the listing broker to buyer broker cooperated cooperating compensation. It does not affect us. The additional amount is zero. right because that's what our contract says yeah now the there's an additional form that you can submit with the purchase agreement that I talked about that says cooperating compensation listing broker to buyer broker now we're not going to have that because our sellers if they are offering buyer broker compensation are going to write that's going to be written into the contract online 406 percent or dollar amount so if the the scary part is let's say you're at ABC Realty and you're to Josh's point getting five bananas as the listing broker and co-opting two bananas to the buyer's broker. In that case,

it's in addition to the amount that gets written in there. So if I come in and I say, I'm getting paid two bananas from the seller, and then I also sign the cooperating compensation document that says I'm getting two bananas from the listing broker, well, now all of a sudden I'm getting four bananas, which seems like a pretty sweet deal. It's a lot of bananas. So that's where it's going to get super weird is you're going to have to know as the buyer's agent if the seller is offering direct compensation or if the listing broker is offering cooperating compensation because they're two different things and how and how because of the new rules on transparency how is that going to be communicated do you think in this new world um i poorly and inefficiently

i mean i think what i what i'd say is is right now we're in a place where there's a lot of confusion right And I think anyone listening to this is going to go, you guys seem like you know what you're talking about, but this is still really hard for me to comprehend. And I would say even for us, it's been complicated to comprehend. So just know that there's probably going to be a period of what I would call like the confusion period where this goes live and no one really is 100%

and people are doing it differently and people screw things up until we all kind of figure out this new model and forms and how it works with different people in different brokerages. So it's going to be really confusing for three to six months. Be okay with that. And in listening to Tom Ferry that I mentioned, like smart people that are talking to attorneys,

talking to potentially people that are involved in the decision making of all this stuff, we have taken a hard stance on follow the rules. Like everyone is going, I read on these lab code agents pages. They're like, why don't we just go to make a third party website? It kind of is gray within the agreement. If we could just make that.

and then everybody puts their commissions in there. They are so ripe for a price-fixing lawsuit because now they're presenting, it's the whole reason this happened is it's all public, it's all on there, and so then that could lead to price-fixing, and that's part of what happened in this lawsuit. So, I mean, our broker just taking a hard stance of, like,

we're not doing that. You're not going on a third party and just doing a workaround around the MLS to try to make this happen. So there's like three camps, I think. There's the people that are going to follow the rules, which is the camp we're going to be in, there's the people that are working on workarounds. And then there's the people that are just going to try to not follow the rules at all, right?

So they'll go show houses without agreements. They'll do whatever. And then I would say there's a fourth group there that just won't know what's going on. Yeah, yeah, yeah. That's like 70% of the agents. That might be the bigger group. And I think the scary part for the people that are trying to do workarounds or not follow the rules is I can guarantee you that these attorneys are ready to file another lawsuit for the folks that are just not willing to follow what is set forth in that law. suit agreement.

Don't be that person. So you got to follow the rules, but you need to know what it actually says and you need to know how to articulate it. I mean, we talk all the time. I said, this is going to be terribly confusing for everybody because the agents in Minnesota don't even read the written statement part of our contract. And you guys, if you listen or are from Minnesota, you know what that is. And they changed it two years ago and made it more confusing.

And now the agents don't read it and the brokers don't know what it says. And it's very frustrating at times when the actual people writing the contracts don't know what they actually say. This is going to be terribly complicated. And I think oftentimes you're going to see that co-opted commission match the amount written in the purchase agreement, which is going to mean it's doubled. And then they're going to have a lot of people really pissed off. Or you have amendments at the last minute to fix it is what's going to happen.

We're obviously not lawyers. So, you know, we can't give advice on this. But if you're a buyer's agent and you're showing houses with a buyer representation contract, the other issue I think you're going to run into because of group four who doesn't know what's going on. They're not even going to have the co-opted addendum written. They're not even going to provide you what that commission is. They might verbally say it to you and they might have it signed. They might not have it signed by the sellers. Your best course of action, what I'm planning on doing is, is I'm just going to put whatever my buyer rep is in this slot, regardless of if they

have they say they have a co-op addendum or they have this document because they likely won't provide it to you. I'll give it three to six months before they just remove a bunch of that language and just put this is what it is what it is that's what it should be yeah but that's whether it's and that's what this is doing though that's what this is solving it's spot here it makes no sense to have there be in addition to the co-opted commission it should just say this is this much or greater whichever one's greater whichever one's greater this is either the co-opted or it's the direct compensation but it's coming directly from the seller to the buyer's broker it's just and then in your listing contracts you should just avoid that cooperating one well and you should follow your broker on what you're supposed to do our because our broker just

stance is saying no co-opted commissions, the compensation comes directly from the seller if they are paying a buyer's broker as part of transaction. The more we talk about it, the more that makes sense to me. And I think one key way that we can follow up on this is next week on the podcast, maybe going through like, you're a buyer's agent. How are you going to approach this? We can role play that. You're a seller's agent. How are you going to approach this? What conversations are you going to have? But also, how are you going to fill out these forms? So we'll have more on this. If you do have questions, though, feel free to reach out. You know where to find a We want to make sure we're being as helpful as we can because this stuff will be in practice sooner than we know.

So don't, when we've said this from the start with this whole thing, don't just stick your head in the sand and be like, it's going to be okay. I'll figure it out later. Like you should be working on this right now or around people who know what's going on. So feel free to reach out any time and thanks for the time today. It's time to read the contracts, understand what's in here. If the people that you're with are not teaching you this stuff, just reach out and you can join our team next week. We love to have you. That's all we have this week on the nerdy agent podcast.

And as always, remember, be better.