Ready or not, real estate agents are entering a new era of how they negotiate both listing and buyer commission agreements across New Hampshire – and no one is quite sure how it will play out at both the agent and consumer levels.

As part of the landmark commission-fees settlement signed earlier this year by the National Association of Realtors, agents and brokers across the nation are having to meet new guidelines intended to give consumers more choice and power when negotiating commissions with listing- and buyer agents. The guidelines went into effect Aug. 17.

For local agents and brokers, that means new written contract forms, such as those provided by the New Hampshire Association of Realtors, will be needed for both sale and purchase agreements.

And it means agents must carefully explain to sellers and buyers, more so than they’ve done in the past, their exact rights and options when negotiating commissions.

In general, industry figures say the more dramatic changes – and the potential for confusion and even disputes – lie on the buyer-side of agreements.

How will buyer agents be paid? Who will pay the buyer agent commissions, directly or indirectly?

What’s Changing

After Aug. 17, gone will be the days when a buyer agent’s commission almost automatically came out of a listing agent’s commission.

Instead, home sellers, not listing agents, will determine how much, if any, commissions they’ll pay to buyer agents. And that’s where the potential for confusion and controversy may arise.

“I’m hoping it goes smoothly,” Susan Cole, president-elect of NHAR and broker-owner of Susan Cole Realty Group in Lebanon, said of future buyer-agreement negotiations. “It could get confusing. We’re on a learning curve here. We need to get used to explaining things more clearly [to customers].”

Adam Dow, CEO of the Dow Group at Keller Williams Lakes and Mountains, said coming changes really aren’t as radical as they may sound.

“We’ve always had to negotiate [commissions],” he said. “We just have to negotiate in a different way now. In most cases, the [commission] numbers won’t change. They’ll just be in different places on forms.”

Some Jarring Changes for Buyers’ Agents

In a way, New Hampshire is in a better position than other states when it comes to buyer agreements. The reason: Unlike most other states, New Hampshire has had written buyer agreements since the 1990s.

“For a small state, we’re really ahead of others when it comes to having buyer agreements,” said Laura Hallahan, chair of NHAR’s legal committee and owner of Laura Hallahan REALTOR in Bradford.

Nonetheless, there will indeed be changes, sometimes jarring ones, on the buyer side.

First, an MLS can longer list what and how buyer agents will get paid, according to terms of the commission settlement signed by NAR.

That means buyer agents can’t assume listing-agents, per their agreements with sellers, or the sellers themselves intend to compensate buyer agents.

And that, in turn, means there will be an element of the unknown exactly what and how a buyer agent will get paid until they reach out to a listing agent or the seller directly to learn commission terms for a specific home sale.

Second, buyer agents will need to negotiate with buyers, up front, what they will get compensated, and under which possible scenarios, before they can even show them a house.

Previously, buyer agreements were more casually handled, often signed only after agents had shown buyers some available homes for sale.

That’s no longer the case. Moving forward, it’s going to be: No signed buyer agreement, no showings, industry leaders say.

Hallahan, whose NHAR committee helped draft new contract language for agents, said there’s a lot of unknowns ahead for both buyer agents and buyers.

“The only thing certain is that [commission terms] can no longer be listed on MLS,” she said. “There’s going to be a lot of moving parts. It’s going to make the process more challenging.”

Listing Agreements More Detailed

Like NHAR’s suggested buyer agreement, new listing-agreement forms make it clear from the very outset: “Commissions are not set by law and are fully negotiable.”

That message was the essence of NAR settlement agreement – i.e. giving sellers clear power over setting commission levels for both listing and buyer agents.

Previously, contracts stipulated that a buyer agent’s commissions would be paid out of the listing agent’s total negotiated commission, which often meant a listing-agent split a final fee 50-50 with a buyer agent.

But that’s no longer the process under terms of the NAR settlement agreement.

NHAR’s new form stipulates what exactly, via negotiations, a seller agrees to pay to a seller’s agent – and then separately stipulates what a seller agrees to pay a buyer agent who brings in an actual buyer.

Impact on Consumers Uncertain

Theoretically, a seller can refuse to pay anything to a buyer’s agent. But the seller then risks agents not showing prospective buyers a home.

Dow, of the Dow Group-Keller Williams, said seller-agents are just going to have to make very clear to sellers what the consequences will be if he or she refuses to pay buyer agents a commission.

The bottom line: Instead of a one-step process to set buyer agent commission terms (i.e. stipulating money will come out of a seller-agent’s commission), it’s now a two-step process of setting a seller agent’s commission and a buyer agent’s separate commission.

“I don’t know if [the changes] have made the process better for the consumers,” said Dow. “I just think the old way was fine. Everything was always negotiable. Now it has to be done in a different way. But we’ll make it work.”

Cole, the president-elect of NAR, said she thinks everything should be fine once the industry gets over the initial bumps and makes adjustments.

She noted her office in the Upper Valley has already implemented many of the settlement-required changes – and they seem to be working.

“So far, everything has gone well,” she said. “We’re getting used to explaining things more.”