You’re finally ready to buy a home. Like any good New Yorker, you’ve been browsing online for months, and now you’re ready to start touring. You pull up a listing you like, one you had bookmarked weeks ago. The listing presents you with a choice – Schedule a Showing, or Ask A Question. You notice that Ask A Question submits your question to a ‘partner agent’. You don’t know what this is and you don’t have a question yet, so you click out of that. You just want to see the place. You click Schedule A Showing. The same window with the ‘partner agent’ pops up. You still don’t know what a ‘partner agent’ is but this seems to be the only way to get a tour, so you click Submit Message.

An agent reaches out to you almost immediately and you coordinate a tour. Yay! You show up to the tour at the agreed-upon time and two agents show up. Now this is a bit confusing. You were only expecting one agent. The agent you texted with is there, and so is another agent you’ve never seen before. You begin the tour. The unfamiliar agent states that they represent the listing – this means they represent the seller. So the agent you texted to arrange this meeting represents ….you?

If ‘your’ agent is responsible, they’ll take a few minutes to explain that they are a buyer’s agent and would represent you in a purchase if you choose to proceed – but only after they’ve already locked in a potential commission on this sale.

How on earth did we get here? How are they getting commission before you’ve agreed to let them represent you? Because before you even showed up for the tour, ‘your’ agent sent the seller’s agent an email with your name designating you as their customer for attribution purposes (which is the correct procedure under relevant rules promulgated by the Real Estate Board of New York). Your agent will probably not mention this to you.

And what if you don’t want the representation? What if you want to self represent? Well, it’s not entirely clear. The agent who first took you on a tour may be able collect a commission on your home purchase whether you want them involved or not, again, because of that email they sent with your name on it before the tour even happened. It’s possible for an agent to lock in any potential commission on the purchase of the home you toured before you’ve agreed to let them represent you, and whether or not you actually agree to let them represent you, if they can demonstrate to REBNY that they were a ‘procuring cause’ of the home purchase.

I can’t think of any other industry in the US in which a customer can be held responsible for a fee that easily climbs into the tens of thousands of dollars (at NYC home values) without signing a contract agreeing to this fee. Yet, this has been the case in residential real estate purchases for decades.

The lack of consumer awareness and consent to representation by a buyer’s agent was one of the key reasons for the many lawsuits against the National Association of Realtors in recent years, which resulted in a landmark settlement earlier this year. While the Real Estate Board of New York (REBNY) is not a member of NAR, REBNY announced to members earlier this week that it has elected to participate in the NAR settlement. This means that REBNY (and real estate agents in NYC) will adopt the rule changes that NAR agreed to as part of this settlement.

In the next couple of posts, we’ll dive into how the NAR settlement changes the rules governing agent retention and compensation, how these changes are likely to play out in NYC, and why the changes may not actually be an improvement for the consumer.