If you’ve had your finger on the pulse of the real estate market lately, you know that as of last month, the National Association of Realtors ushered in the most impactful changes in a generation. These changes will be evident when you next attend an Open House, as a looky-loo or a serious buyer.
Buyers are now involved with paying their agent’s commission
Everything is negotiable, and the new commission rule is no exception.
Sellers are no longer responsible for paying the buyer’s agent’s commission – but someone has to.
Both sellers and buyers now have multiple options and lots of room to negotiate who and how a buyer’s agent is paid. For example, buyers can ask the seller for a credit to cover all or part of their agent’s fee as part of their offer.
If a buyer has already negotiated a fee with their agent of around 1%, the seller will most likely offer to cover the remaining 1.5% or 2% to the buyer’s agent. If your offer includes a 1% seller credit and a competing buyer asks for 3%, your offer could become more attractive to the seller.
If a seller chooses not to offer the buyer’s agent’s commission, the buyer is responsible for negotiating their agent’s compensation. The buyer has several options for this negotiation.
Among a few other options for a buyer, is to ask the seller for a concession with their offer. They could request that the seller pay for fees at closing such as the title insurance or escrow fees. Another option is to include their agent’s commission in the purchase offer or to request an interest rate buy down. Buyers could also opt to pay their agent’s entire commission out of pocket.
Buyers also have the option to search and negotiate alone, however this comes with many risks. One of the biggest risks of buying a home without an agent is not having expert support during the negotiations. Agents bring the knowledge and experience in determining fair market value and negotiating all aspects of the transactions including price, in-depth understanding of current market conditions, trends, and comparables. In addition, real estate agents have direct access to the Multiple Listing Service, not available to the public, but are also connected to a larger professional network. Determining fair market value and negotiating the best deal requires skills and experience .
New Rules bring transparency to the transaction
Previously, a seller would use the proceeds of their sale to pay a commission of 5% to 6% to the listing agent, who would offer half of that to the buyer’s agent. This commission, usually 2.5% to 3% would be advertised on the MLS for that specific listing.
Sellers still have the option to offer to pay the buyer’s agent’s commission. If the seller does decide to offer compensation to a buyer’s agent, their agents are allowed to advertise anywhere but the MLS, for example on their website and/or their brokerage’s website. They are prohibited from posting any offer of compensation to a buyer’s agent on the MLS in an effort to prevent steering from unethical real estate agents.
There will be new forms to review and sign at open houses
Along with these new rules, buyers will be required to sign a written agreement before an in-person or virtual tour of a property and will be asked whether they are a buyer with or without representation.
If the listing agent is not representing the buyer, they will be asked to sign a form entitled Open House Visitor and Non-Agency. This form makes it clear that the listing agent is not representing the visitor.
If the buyer chooses to have that listing agent represent them for that listing during the Open House they will be asked to review and sign a form called Limited Property Representation and Broker Compensation Agreement.
Perhaps the most widely used form before a buyer begins their house hunting journey is the Buyer Representation and Broker Compensation Agreement. This form enables the buyer to be represented by a buying agent for up to 3 months for specific properties and locations the buyer chooses. This agreement may be renewed after the 3-month period has expired. In addition, this form includes how much and how their agent will be compensated.
These new forms will reform how buyers’ and sellers’ agents are compensated, bringing both parties into negotiations over commissions on the sale of the house– negotiating who pays commission and how it is paid. The buyer will have to negotiate their own contract with an agent and decide for themselves how much commission to pay.
It remains to be seen how this new policy-and the others change the complexion of the industry. The real estate profession and how homes are sold and purchased is constantly evolving and the practice changes are part of that equation.
During my career as a Realtor, I’ve experienced lots of changes driven by technology, how we communicate with each other and buyer and seller expectations. As realtors, we will adapt quickly, and our clients will also understand even more the value a Realtor brings to all aspects of the transaction.
Colleen Bliss, [email protected] (925) 922-4401, DRE 01960410, Sereno at Christie’s
Haven’t been house hunting since the early to mid 70’s. Hard to remember the playbooks. Tell me, if an independent individual is strictly a looky-loo and not going through a realtor do we have to fill out forms?