Recent Changes to How Realtors Work
On August 17th, some big changes took effect that impact how real estate agents engage with buyers. The new rules are intended to make commissions more transparent and negotiable. Here’s a brief overview.
Change 1 : Buyer’s agent commissions are no longer set in advance by the seller.
Previously, it was customary that when listing a home for sale, a seller would decide how much commission they would pay to their own agent as well as to the buyer’s agent. These amounts were established in the listing contract, and the buyer’s agent commission was published in the Multiple Listing Service and on many consumer-facing websites. When the home sold, the seller would typically pay the commission of both agents.
Now, the buyer’s agent commission is no longer a part of the listing details. Instead, the buyer’s agent commission is discussed and agreed to by the buyer and their agent when they start working together (more on that below) and when the buyer finds a house to buy, they can either choose to pay their agent out of their own pocket or they can ask the seller to pay their agent’s commission. Since sellers have customarily paid both commissions, experts think that many sellers will still pay both commissions. In cases where a seller does not want to pay both commissions, the buyer would have the option to offer to pay extra for the house and then ask the seller to pay the commission from the “extra” money.
How does this benefit consumers?
This change makes commissions negotiable and transparent. Buyers can negotiate with their agent to reach a commission amount that they feel is fair, and they will have full knowledge of how much commission is being paid.
Change 2 : Buyers will sign a Buyer Representation Agreement before touring any homes.
It’s now required by law that buyers sign a Buyer Representation Agreement before touring any homes. This agreement explains the duties of a real estate agent and what they will do to help the buyer, and determines how much commission will be paid. The agreement can be amended if necessary, and buyers can cancel the agreement if they’re not satisfied with their representation. But beware, the agreement includes a provision where realtors can include a non-refundable retainer before they start working with a buyer, or an early termination fee, so make sure you understand the terms before signing.
Buyers are still free to attend open houses without signing an agreement, so if you encounter someone at an open house trying to get you to sign one, please reach out to your trusted Proud agent for advice.
How does this benefit consumers?
Buyers will have a clear understanding of what their realtor will do to help them and how much they will be compensated, before they start working together, making the relationship more official and professional.
Confused?
If this is a little confusing, please reach out anytime with questions. Happy house hunting!