Pasadena Real Estate Agent Adam Bray Ali [Courtesy photo]
After a year that has seen major changes in real estate commissions, real estate agents and homeowners alike are adapting to the new landscape of the home selling process. A series of class action lawsuits (beginning in 2019 and settled in 2024) filed in the Midwest against major real estate companies led to settlements calling for greater transparency and flexibility in commission structures.
“Our sales contract includes four basic requirements,” explains Pasadena-based Realtor Adam Bray Ali.
1) The advertised price for listing your home for sale
2) Broker Remuneration
3) Contract Period
4) Defining the obligations and requirements of all parties
According to Bray Ali, fee schedules for this work, and agreements to pay a portion of that fee to the agent representing the real estate buyer, have long been part of the contract, and local custom and norms in Pasadena generally required the selling agent to split half of the total commission with the agent representing the buyer.
In California, the standard contract provided by the California Association of Realtors (CAR) highlights the total commission amount and the breakdown of payments to “co-brokers,” but a settlement created by the National Association of Realtors has made it mandatory nationwide. While it was common for sellers to pay a fixed percentage commission to both brokers involved in the sale, it is now expected that there will be no promise of the seller paying a commission to incentivize the buyer’s agent/broker to bring a buyer to the property.
Bray Ali said MLS rules mean sellers no longer have to pay commission to buyer’s agents.
For years, Pasadena required a minimum of $1 to enter into a binding agreement on cooperation and compensation between real estate agents, he said.The change will allow both sides in a transaction to negotiate independently, potentially lowering overall commission costs.
A new property purchase and sale agreement drafted by the California Association of Realtors is due to be published in July 2024 and will highlight the changes.
Bray Ali said the biggest impact of the new rules resulting from the settlement is that all buyers will need to agree to a compensation agreement with their broker prior to any brokerage discussions. The rules require buyers to have a similar type of agreement signed by sellers, which includes deadlines, compensation and obligations expected of all parties.
When considering whether to work with a real estate agent, Bray Ali advises homeowners to ask key questions about the agent’s experience, marketing plan and potential red flags specific to their property.
“Ask smart questions, such as: How long have I been in the business? Do I have proven experience in this type of work? What problems or opportunities do you see with my property?” he suggests.
While working with a real estate agent isn’t required, real estate agents say it can be beneficial in navigating the legal aspects and paperwork involved in a real estate transaction.
Despite the uncertainty, Blay Ali highlights the positives of the current property market.
“We live in the greatest country in the world to own real estate,” he said, highlighting the liquidity and clearly defined legal system that makes it easy to transfer property.
But he also acknowledged that rising interest rates over the past 18 months have reduced speculation and may lead to lower home prices in many areas.
The City of Pasadena’s passage of Local Measure H, a “rent control” bill, has resulted in a series of new laws regulating rental properties, creating notable changes in the rental housing market.
To navigate these changes, Bray Ali believes homeowners will need to carefully consider their needs and whether working with a real estate agent is in their best interest.
“I think practical homeowners understand what’s best for them and that there’s no right answer for everyone,” Bray Ali said.
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