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Kirsten Ganas was ready to fire her real estate agent.
It was late March, right in the thick of homebuying season in southwest Pennsylvania. Ganas and her partner, Austin McCarley, had recently learned they were expecting their second child, and they were thrilled at the prospect of upgrading from their two-bedroom rental. They were less enthused, however, about the services provided by their agent, Dan Waterhouse. He'd reached out to them in early January, after they requested their first home tour on Zillow; since then, Waterhouse had shown them roughly two dozen properties. He was nice but sometimes slow to respond, Ganas says, and he lived far from their desired area — no good in a fast-moving market. Shortly after getting outbid on a property, Ganas texted to let him know they'd be moving on.
There was just one problem. When they met Waterhouse for that first home tour, he'd handed them a couple of documents: standard paperwork, he explained, that they would have to sign before seeing the home together. One of those documents contained language that exclusively bound the pair to Waterhouse's brokerage for a year. The only way to terminate that agreement, Waterhouse said, would be to get permission from Rita Sumney, the head of the brokerage. When Ganas contacted Sumney, she got more bad news: getting out of the agreement would come at a cost. Unless they paid an "early termination fee" or found another brokerage willing to pay Sumney a referral fee, they'd be tied to her brokerage well into January 2027. If they bought a home any earlier — even without using an agent at all — they'd still owe the full commission they'd agreed to: a flat fee of $995 plus a percentage of the sale price, which would likely amount to thousands of dollars.
"We just got that sick feeling about being stuck in this contract," Ganas tells me.
Ganas and McCarley had signed a "buyer representation agreement," a contract outlining the terms of the relationship between buyer and broker. Until just a couple of years ago, this would have been unusual — agents typically waited to hand their client any formal documentation until later in the process. But thanks to a seismic legal settlement in 2024, most agents are now required to get a written agreement before they step through the front door with a client. One broker I spoke with at the time called it "the biggest change in 100 years."
The new rule was intended to make sure buyers know exactly what they're signing up for when they enlist an agent. But consumer advocates warn that millions of prospective buyers risk being tethered to inept agents or agreeing to inordinate fees before they've had a chance to get a feel for the relationship. In many ways, these contracts are the most tangible byproducts of a settlement designed to shore up consumer protections. Two years in, though, the results are mixed.
"The idea that buyer-broker agreements have to be signed before they show any houses is great," says Doug Miller, a real estate lawyer in Minnesota who helped craft the class-action lawsuits that led to the settlement. "But the practice of springing this on a consumer at the threshold is amazingly unfair and dishonest."
Not so long ago, many buyers' agents readily advertised their services as "free." Of course, this wasn't true — nobody works for free — but it may have felt true to buyers because of the roundabout way in which their agents got paid. The vast majority of buyers never cut a check to their representative. Instead, both brokers quietly banked a slice of the seller's haul. Here's how things would generally go:
- Jackie is selling her $500,000 home and agrees to pay a 6% commission to the brokers who make the deal happen.
- Her agent lists the house on the multiple listing service, or MLS — a local database where agents advertise homes for sale — and promises to pay a 3% commission to any agent who delivers the winning buyer.
- Jerome, with the help of an agent from another brokerage, offers to buy Jackie's home for the full asking price. The two sides hammer out a deal.
- After the sale closes, Jackie pays $30,000 to her broker, who then splits that amount with Jerome's broker. Both brokers walk away with $15,000.
All of this money comes from the buyer's down payment and mortgage, but from Jerome's perspective, it's out of sight, out of mind.
This state of affairs was upended in the fall of 2023, when the National Association of Realtors, the industry's main trade group, lost a multibillion-dollar, class-action lawsuit over agent commissions. The plaintiffs, a group of aggrieved sellers, argued that this method of paying agents forced them to accept inflated fees and opened the door to tactics such as "steering," which discouraged negotiations over commissions. The ensuing settlement, unveiled in the spring of 2024, included a few rule changes. Key among them was a new requirement for the vast majority of agents: before so much as touring a home with a client, they'd need to agree on the terms of the relationship — in writing.
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The exact details of these contracts can vary dramatically. When it comes to specifics like fees or term length, it's up to buyers and their agents to fill in the blanks. The agreements can range from one day to an entire year, or from "exclusive" to "non-exclusive" — a version that allows a buyer to work with multiple brokerages at once, though they'll likely owe a commission to the agent who shows them the winning home. Some agents might initially have buyers sign a "touring agreement" to show them a property or two before deciding whether to enter a lengthier relationship.
The practice of springing this on a consumer at the threshold is amazingly unfair and dishonest.Doug Miller, real estate lawyer in Minnesota
Prior to the settlement, at least 15 states required buyers' agents to have a signed agreement in hand at some point in the process, though not necessarily at the very beginning, researchers at the Federal Reserve found. In the rest of the country, a buyer's agent may never have bothered to get one signed, since the MLSs could be counted on to step in and ensure everyone was paid according to the advertised commission. The new rule's aims seemed noble. Agents work for a fee, after all, and both broker and client should be clear on what they'll get out of the relationship and how long they'll be tied together. Almost immediately, though, problems arose. State Realtor associations and individual brokerages began crafting lengthy forms that some lawyers and consumer-advocacy groups lambasted as needlessly dense. Any buyer, critics argued, would struggle to parse the thick legalese and unfamiliar terms.
"For a lot of buyers, this is completely new," says Sharon Cornelissen, director of housing at the Consumer Federation of America. "They're not used to having to sign a contract."
Ganas and McCarley were unaware of all the contractual hubbub when they began their house hunt at the end of December. After scrolling through Zillow for a bit, they clicked the blue "request a tour" button for a place that caught their eye. This shuttled their contact information to Dan Waterhouse, one of many thousands of agents who pay Zillow a fee in exchange for leads on potential buyers. The house quickly went under contract, but he arranged to show them a few other properties, starting with a handsome three-bedroom, two-bathroom home in Somerset, Pennsylvania.
It wasn't until they were standing at the house's entrance, eager to begin the tour, that Waterhouse mentioned the representation agreement. By then, more than a week had passed since their initial contact over text. The conversation about the contract was brief, Ganas says, with Waterhouse explaining it in broad strokes — stuff like "you're not going to work with multiple Realtors at a time," she recalls. Ganas and McCarley took turns holding their daughter while they signed on the wall of the home's entryway. "It was really naive of us," Ganas tells me. But at that early stage, she says, they hadn't expected to enter such a binding arrangement.
"It just didn't feel like it was a proper setting, or properly explained," Ganas says. "All those things kind of added up to us not realizing the extent of that document."
Waterhouse disputes this. He tells me via email that he explained the primary differences between the "exclusive" and "non-exclusive" contracts, and that both Ganas and McCarley said they'd prefer the exclusive (Ganas denies that he presented them with this choice). He also says that he provided a summary of the numerous items on each page, including the term length and his typical fees, "and they each had an opportunity to read through it in detail."
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Upon closer inspection, the agreement contained several provisions that have long raised concerns among consumer advocates. For one, the yearlong lockup was far lengthier than the two- to three-month term recommended by groups like the Consumer Federation of America and Consumer Policy Center. "You can always extend it," says Wendy Gilch, a fellow at the CPC. "It is much more difficult to get out of it." Ganas and McCarley had also agreed to pay Waterhouse a commission of 4% of the home's sale price — well above the national average of 2.7% — plus a $995 flat fee (the CFA has referred to this additional charge, often called an admin fee, as a "junk fee"). The contract didn't mention anything about the buyer's options to terminate the agreement. And if Ganas and McCarley decided not to buy, and ended up leasing a property at any point during the one-year timeframe, they'd still owe the brokerage one month's rent plus the $995 fee.
"I saw that, and my heart dropped," Ganas tells me. "I didn't even realize that was in there. I didn't know that was even a thing."
All of these details are perfectly legal, and Ganas readily admits that she and McCarley are adults who signed a contract. But she can't shake the feeling that they entered the conversation at a disadvantage. Real estate agents live and breathe this stuff, while the typical consumer buys or sells a home only a handful of times in their life.
"How many people could read that contract and understand all the implications of it?" says Prentiss Cox, who teaches consumer-protection law at the University of Minnesota.
How many people could read that contract and understand all the implications of it?Prentiss Cox, consumer-protection law professor
A common refrain in the industry is that any broker worth their salt would release a buyer if the relationship truly isn't working — handcuffing them to a contract isn't worth the negative online reviews or harsh word-of-mouth. "We're not interested in tying people up in an agreement they don't want to be in," says Laura Ellis, a brokerage executive in Illinois.
Sumney, the broker Waterhouse works under, maintains a different view. "To be honest with you, I really hate that perspective," she tells me. "When you let somebody out of an exclusive buyer-agency contract, you've just devalued that contract for every Realtor in our industry." A home search may very well take a year, Sumney says, and even then, a real estate agent has no guarantee of a payday. (Waterhouse tells me that he has worked with other clients for over three years while they searched for a home.) Though agents partner with a brokerage, most are independent contractors who rely on commissions — all those weekends and evenings spent working don't yield a cent unless a deal goes through. As for the fees, the buyer representation agreement clearly says they're negotiable before signing, Sumney says. Even after the agreement was finalized, Ganas was able to bargain Waterhouse's commission down to a more typical 3%, from the initial 4%, when she and McCarley made an offer on a home.
Waterhouse tells me via email that Ganas generally had "high expectations" regarding property availability, her "large and varied search area," and response times.
"Dan is one of our top agents," Sumney tells me. "He has the numbers to show it. So one bad review next to all of these other clients that he has, that appreciated Dan, had no problem paying Dan, understood what his commission was — you know, you've got to weigh it."
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On March 31, an incensed Ganas called Sumney to seek a release from the agreement. It didn't go well. "I did kind of raise my voice," Ganas tells me. "I was a little emotional." Eventually, Ganas calmed down, and Sumney offered to find another agent at her brokerage who lived closer to them. If they wanted to enlist a different brokerage, Sumney said, she could work out a referral fee. Ganas asked about paying to end the contract, and Sumney said she could calculate an early termination fee based on the work Waterhouse had done for them so far. After talking with McCarley, though, Ganas turned resolute: "I'm like, 'No. You do not get any money from me.'"
The next day, Sumney posted a video on her TikTok. Seated at her desk and speaking directly into her phone camera, she issued an impassioned primer on buyer representation agreements — and the importance of understanding that "contracts are legal and binding."
"Please, guys, if you are signing anything, please understand what you are signing and allow the Realtor to explain it," Sumney said. "And if you have a Realtor who will not explain these forms to you, who is only sending them over and signing them right there, then get another one."
Perhaps we expected too much of these agreements. A few extra signatures were never going to fix the squabbling over real estate commissions or the often messy relationship between buyer and agent. An NAR spokesperson tells me via email that the rule changes have "further empowered consumers to negotiate compensation and promoted transparency in the marketplace." But research published last year by the Federal Reserve found that, prior to the settlement, state laws requiring signed buyer representation agreements had no significant impact on commissions — in other words, buyers weren't suddenly more likely to bargain down fees if they were handed a contract to sign. And despite the rule changes, most sellers are still offering to cover buyers' agent commissions, keeping the old, roundabout way of paying brokers intact. Almost two years after the settlement went into effect, predictions of a massive shift in real estate fees haven't come to pass.
The consumer advocates, lawyers, and brokers I spoke with all offered some version of this advice for prospective buyers: Think like a seller. If you choose to work with an agent, interview at least a few of them to get a sense of which one might best suit your needs. Make sure you're clear-eyed about the terms of your arrangement and the fact that, one way or another, you could be on the hook for thousands of dollars. Ask whether those services are worth it, and what your alternatives might look like.
"Really do your research upfront," Cornelissen, from the CFA, tells me. "Because once you sign, you may be stuck with them for a while."
Ganas and McCarley continue to keep tabs on the market, but for now, their home search is on pause. Their plan is to wait until their agreement expires in January, when they'll resume the hunt — this time with a year's worth of harsh lessons under their belt.
"When we're ready to buy a house," Ganas tells me, "I will be much more versed, I guess, in these things."
James Rodriguez is a correspondent on Business Insider's Discourse team.
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