The real-estate industry is bracing for impact with new broker commission rules on home sales scheduled to take effect in July, and the marine industry is closely watching the fallout, on the assumption that a similar shakeup may occur with boat-sale commissions next. “It’s going to make every agent have to sharpen their pencil and really fine-tune their buyer presentation,” says Kelly Sprigg, owner of The Sprigg Group in Marco Island, Fla., which brokers homes as well as boats. “Not only are you doing a listing presentation to get the listing, but now you’re also going to have to compete to be the buyer rep in a transaction.”
The changes in the real-estate market stem from an October jury verdict in federal court that held the National Association of Realtors, along with two brokerage firms, liable for $1.8 billion in damages for conspiring to keep commissions artificially high. On April 24, a federal judge approved a settlement with a provision that seller’s agents will no longer be required to offer commissions to buyer’s agents. Previously, the buyer’s agent commission had been baked into the asking prices on home listings, with the home seller paying a 5% or 6% total commission, and the listing and buying brokers often splitting that amount. The settlement does not explicitly end the traditional 5% or 6% total commission, but going forward, the rates will be competitive and negotiable.
Following the jury verdict in the real- estate case, a similar lawsuit was filed in late February in the marine industry. Ya Mon Expeditions alleges that a boat-sale listing agreement included a non-negotiable 10% commission. The lawsuit contends that the buyer’s broker and the seller’s broker were both with the same company, resulting in the 10% commission being pocketed by a single firm: “But for the conspiracy among the Defendants, YME would not have been forced to pay an inflated broker commission.”
That case was still working its way through the courts as this issue of Soundings Trade Only went to press. Boat brokers were watching not only for the marine lawsuit’s outcome, but also to see what happens next with real-estate agents as their industry’s settlement terms take effect. Whatever happens in real estate, the thinking goes, may help boat brokers anticipate changes that could eventually hit the marine market. “I think the real-estate market is going to be the testing ground,” Sprigg says. “And there’s so many different lawsuits going on now, it’s hard to keep track.”
More questions than answers are spreading on Florida’s east coast, says Gary Dezarn, owner of The Real Estate Captain in Fort Lauderdale, which brokers homes and boats. “For the most part right now, it’s confusion,” Dezarn says. “People are confused about what’s going to happen.”
Sprigg and Dezarn both say that they expect newer and occasional brokers to have a harder time adapting to whatever changes might be in the offing. Brokers who are established with longtime, repeat clients and referrals have already proved their value to buyers, they say. “I think it’s going to hurt younger, less-established agents for sure,” Dezarn says. “I work with a handful of buyers. For me, moving forward with these guys, I’m not worried about it. If you’re established and you know the market, and the buyers trust me and I take care of whatever they need, it’s a relationship. If you have strong relationships, it’s going to affect you a lot less than someone who is new in the market.”
Sprigg says she foresees less-established and less-dedicated brokers being unable to continue doing business as competition gets tougher. “It’s going to weed out the weak in real estate, which we need. Some of these brokers, I have to redo the buyer’s contracts because the agents don’t know what they’re doing,” she says. “I’m not seeing it on the boating side yet the way I’m seeing it on the real-estate side, but obviously, if you come after one industry, the other one is going to fall, too.”
Like Dezarn, Sprigg says she believes her well-established business will be one of the ones still standing after the changes shake out. “I welcome this, which is a totally different stance than a lot of the agents in the room,” she says. “It’s going to make us do more upfront educating with my clients, but I’m already transparent with all the details for my customers anyway, including the commission.”
She and her team are discussing ideas that would let them retain the income of buyer’s side commissions. Again, she stresses, the real-estate court settlement doesn’t say those types of commissions are off the table. It just means that brokers have to work harder to get them from buyers. “Say I’m working with you, and you want to go look at four properties,” she explains. “I’ll say, ‘Perfect, I have three more, let’s go looking and see what you think.’ I would now have you sign a buyer-broker agreement with me stating I’m going to get paid a certain percentage of the commission or a flat fee or, thinking creatively, maybe a percentage of what we get off the asking price.”
In addition, she says, brokers representing buyers can build time constraints into those representation agreements. That way, a buyer’s broker won’t end up working endlessly to try and help a buyer who never ends up buying anything. “It can be three days. It can be three hours,” she says. “Maybe some agents will want to be paid hourly. I don’t see how that’s going to work, but you never know.”
From her perspective, there is an upside to brokers having those kinds of explicit agreements with buyers. “You’re only going to get home buyers who are serious out of the gate,” she says. “They’re not going to sign a buyer-broker agreement with me if they’re not going to want to work with me.”
At the same time, though, Sprigg notes that what’s happening gives buyers reason to think harder about paying those commissions at all — and that compared to other nations, U.S. buyer commissions are high. According to Yahoo Finance, while about 90% of U.S. residents use buyer’s agents, the average is only about 33% in other countries. And in those other countries, the commissions paid to buyer’s brokers are lower. Commissions on a $500,000 home sold in the United States would be about $25,000 to $30,000 with a 5% or 6% total fee, compared with a roughly $6,500 commission paid in the United Kingdom.
U.S. buyer’s brokers have long argued that they work for the money they earn, and that the commissions are worth it. “We work our asses off. I do a ton,” says Sprigg, whose home sales average $1.5 million to $4.5 million. “I stage properties. I’m managing vendors coming in and out. I’m meeting them if my seller cannot. I’m out of pocket about $10,000 on one listing already, but I’ll get it back on the higher sales price and the commission.”
Going forward, brokers will need to pitch buyers on the value of their services. Market analysts say those sales pitches may work with higher-end clients, but not necessarily with first-time buyers. Newcomers often put every dime they have into a down payment on a home, especially with current high interest rates on financing, which means that however the new normal shakes out, it may end up pricing first-time buyers out of representation altogether. They might try to handle the transaction without a buyer’s broker.
In the real-estate market, there is talk of changing regulations to let buyers roll a broker’s commission into the mortgage terms, specifically to ensure that first-time buyers can still access the services of reputable brokers. The sales pitch that Sprigg says she will be making to buyers would apply to first-time and experienced buyers alike.
“For people buying a home, it’s probably the largest investment or largest expenditure that you’re going to make. Do you really want to represent yourself when you don’t know what you’re doing?” she says. “Do you want to go through a sea trial and survey process without representation? Nobody really wants to do that, so you just kind of have to break it down. If you’re at the part of your life where you can buy a $5 million boat or a $5 million home, would you have gotten here without getting paid? And why would you expect me to do that?”
Whether that sales pitch will work remains to be seen. The only thing that seems certain is that brokers are going to have to adapt and compete as consumers start to hear all kinds of pitches from buyer’s brokers — a new reality that at least some well-established brokers say they will be able to manage. “I’m not afraid. I welcome the change, quite honestly,” Sprigg says. “I know I’m going to be fine. It’s just a matter of how long it takes the industry. But there will be hiccups along the way. That’s just life.”
This article was originally published in the June 2024 issue.
