Residential Real Estate

Overview

A recent National Association of Realtors (NAR) ruling has reshaped the real estate landscape, prompting a reevaluation of traditional agent compensation practices. Effective August 2024, due to a lawsuit by the Department of Justice against the National Association of Realtors (NAR), real estate agents must change how they contract their services and disclose their commissions to their clients upfront. This change aims to promote a more transparent commission arrangement between buyers, sellers, and their agents.  

Why the Change? 

Previously, property sellers signed a listing agreement with a selling agent or brokerage, agreeing to a total commission (typically 6% of the purchase price) to be paid at closing by the seller. This agreement also specified the amount paid to the buyer’s agent, usually half. These commissions were technically negotiable, but, as alleged in the lawsuit, buyer’s agents were “steering” or filtering their prospective buyer clients to listings with the highest commissions only. Consequently, selling without a listing agent who was not a member of NAR (and thus not accessing the Multiple Listing Service (MLS)) or selling “by owner” only made marketing the property challenging, if not impossible, due to buyer’s agents not showing the properties to their prospective clients (many of which had no knowledge their agent was avoiding such properties). The NAR lawsuit argued that this system was anti-competitive. 

What Has Changed? 

Starting in August 2024, under the NAR settlement, offers of compensation between buyer and seller agents will no longer be allowed in MLS listings. Buyer agents must now create and execute a Buyer Broker Agreement with potential buyers, detailing the agent’s compensation at the beginning of the representation. If the seller will not cover the commission, the buyer must pay the difference or negotiate other compensation. This change means buyers will reconsider the cost of agent services, and buyer’s agents can no longer “steer” their clients to listings with the highest compensation. 

Leading the Change  

Our Real Estate team has diligently examined the implications of these changes, focusing on the fundamental shifts affecting sellers, buyers, and their respective agents. Through our analysis, we have identified a pivotal opportunity: an alternative representation for buyer through attorneys. This transformation underscores our commitment to offering a compelling alternative, grounded in professionalism, accessibility, and ethical standards. 

Why Choose Us Over a Buyer’s Agent? 

At Kelley Kronenberg, we prioritize your financial and legal well-being, offering a breadth of services designed to protect your legal and financial interests.  

We Safeguard Against Unlicensed Practice of Law 

Unlike traditional real estate agents, our team is comprised of experienced and licensed attorneys, ensuring every contract is legally sound and binding. The unlicensed practice of law occurs when individuals who are not licensed attorneys perform tasks legally reserved for lawyers. This can include drafting legal documents (such as addendums), providing legal advice, and interpreting or applying legal principles to specific situations. While knowledgeable about the market and transactional processes, real estate agents generally lack the legal acumen to navigate complex legal issues they should arise. As a result, buyers working with traditional realtors often face the additional expense of hiring an attorney to review contracts and provide legal guidance. 

The Risks of Unlicensed Practice of Law 

Unlike traditional real estate agents, our team is comprised of experienced and licensed attorneys, ensuring every contract is legally sound and binding. The unlicensed practice of law occurs when individuals who are not licensed attorneys perform tasks legally reserved for lawyers. This can include drafting legal documents (such as addendums), providing legal advice, and interpreting or applying legal principles to specific situations. While knowledgeable about the market and transactional processes, real estate agents generally lack the legal acumen to navigate complex legal issues they should arise. As a result, buyers working with traditional realtors often face the additional expense of hiring an attorney to review contracts and provide legal guidance. 

 Our licensed attorneys handle all aspects of your real estate transaction, from drafting and reviewing contracts to providing sound legal advice. Our approach ensures: 

• Comprehensive Legal Guidance: We provide thorough legal advice on all aspects of your real estate transaction. Our attorneys can explain complex legal concepts, assess potential risks, and advise on the best course of action. 
• Conflict Resolution: Should any issues arise during your transaction, our attorneys are equipped to handle negotiations and legal disputes, ensuring your rights are protected at every stage.  
• Custom and Comprehensive Agreements: Our agreements are meticulously crafted to safeguard your interests, providing immediate and long-term protection. We understand that a real estate contract is more than a mere transaction; it is a vital document that demands legal scrutiny. By customizing each contract, we address your unique needs and circumstances, ensuring robust protection throughout the transaction process.  
• Legally Binding Contracts: Our attorneys meticulously draft contracts to ensure they are legally enforceable and tailored to your specific needs. This precision helps prevent future disputes and protects your interests.  
• Protection from Legal Risks: By having licensed attorneys handle your transaction, you are safeguarded against the pitfalls associated with the unauthorized practice of law. Our expertise ensures that all legal documents and procedures comply with current laws and regulations. 

Financial Benefits  

When using Kelley Kronenberg, you will benefit from the protections afforded by our legal guidance and expertise and reap substantial financial benefits.  

• Capped Service Fees: Fees for our services are generally less than 1% of the purchase price or a flat fee, whichever is less, delivering substantial savings for buyers. 
• Cost Savings on Title and Transaction Handling: Entrusting us with both title and transaction management translates to additional cost savings, optimizing the overall financial outcome for our clients.  
• Beneficial Payment Structure: Much like an agent’s commission, we factor our fees into the initial offer as a traditional seller concession, using this traditional mechanism to reduce or eliminate out-of-pocket expenses for buyers.
• Reduced Loan Sum: By eliminating commissions to buyers’ agents, buyers can significantly reduce the sum of loans required, enhancing their financial well-being and a more attractive buyer to sellers who generally pay the buyer’s agent’s commission. 

Comprehensive Services for Buyers and Sellers 

We provide full title, escrow, and closing services tailored to your unique needs. Unlike traditional title companies, we offer the added advantage of a full-fledged real estate law practice, ensuring comprehensive support and resources to address any complexities or disputes that may arise.  

Our services include:  

• Corporate or Entity Formation 
• Easements and Encumbrances 
• Forgeries and Fraudulent Conveyances  
• Land Trust Creation and Probate Avoidance Options  
• Legal Description Reformations  
• Mobile Home Title Certifications  
• PACE Lien-Priority and Validity Disputes  
• Quiet Title Actions 
• Restrictive HOA/COA Issues  
• Title Insurance Claims and Coverage  
• Title Reformation Actions 

Understanding the nature of title claims, title litigation, and holding title insurers accountable is a premier attribute our attorneys give to our clients throughout the industry.  

Title and Title Insurance  

With our years of title experience as underwriters and approved title agents, Kelley Kronenberg attorneys represent lenders, investors, and mortgage servicers in all matters related to title defects and encumbrances to ensure our clients’ security interests remain viable and lasting. 

Our Client-Centric Approach 

At Kelley Kronenberg, exceptional client service and rapid response times are our hallmarks. When you choose us for your real estate transactions, you can trust that you will receive the highest level of expertise and communication throughout the process.