Everything you need to know about the new real estate rules
You’ve probably heard rumors, whispers, and straight-up shouting on the news about it…
But like, actually…what is happening in real estate? You know there’s been a change but…what?
Let’s break it down.
This year, the National Association of Realtors (NAR) settled a lawsuit by agreeing to eliminate informal rules to the industry’s traditional payment structure, where home sellers typically paid a 5% or 6% commission, usually split between their agent and the agent representing their home buyer.
What this means in reality is that compensation offers will be removed from the Multiple Listing Service (MLS—this is where Zillow pulls from and almost any home you’ve seen online was put on the MLS by a realtor) and buyers will now be required to have more frank conversations about compensation with their agents. Before, a buyer didn’t really need to think twice about compensating their agent because the seller generally paid both commissions (to their agent and the buyer’s agent)—now buyers will need to take this cost into consideration.
FOR BUYERS:
You will now need to sign a buyer/broker agreement with a real estate agent before you can can tour any properties
The agreement will include an agreed-upon compensation amount/percentage that is completely negotiable and you would only be responsible for if you close a deal with your agent
You can still attend an open house unrepresented (aka without signing anything with an agent)
If this sounds scary, it’s ok. There are a lot of ways to protect yourself without getting stuck in a lengthy, inflexible agreement with an agent. These include
Sign the agreement short-term, like 7 days or even just 1 day if you only want to tour one property
Sign a agreement that is only for one particular property (i.e., if the agent shows you THAT PROPERTY and you make an offer, the agreement is valid—if you buy something else, you don’t owe them)
Sign a non-exclusive agreement with an agent to tour properties if you are still feeling them out—this might not encourage highest and best service if they know you’re still playing the field, but will keep you from having to work with one agent exclusively
We don’t know if sellers will continue to offer compensation to buyers’ agents as has been customary in the past—many of them likely still will! This will become part of negotiations. And on the bright side, you’ll know exactly how much you agreed to compensate your agent, and if the seller isn’t offering any compensation to cover some of that cost, you can deduct it from your offer.
FOR SELLERS:
Everyone is talking about how things will change for buyers, but I’m hearing less about sellers.
On the one hand, it will no longer be the general expectation that you, as a seller, pay compensation to the buyer’s agent, and you can opt out of that entirely if you want and only pay compensation to your own agent.
If you’re not going to offer compensation to the buyer’s agent, you’re going to have to price lower than the comps in your market. Why? Because all along, compensation for the buyer’s agent was baked into the price. If sellers are now offering to pay 2-3% less (the buyer’s agent comp) than most were paying a month ago, than you’ll need to deduct 2-3% from the price of comparable properties to reach a fair number. Because buyers will absolutely be factoring in compensation to their agent in their offers.
I expect most (good) agents will still advise sellers to offer some level of compensation to the buyer’s agent because EVERYONE in the transaction benefits from having a buyer who is working with an agent.
Think of it this way: in Florida, we generally use a standard contract. Real estate agents are trained in and use the contract every day. Imagine you’re selling your house to an unrepresented buyer—do you want them writing the legal contract for the sale of your property? No. No you don’t.
If you’re not offering compensation to the buyer’s agent but your buyer is working with an agent—there’s a good chance they’re going to deduct that compensation from their offer, meaning whether you offer to pay for it or not…that money is gone.
It’s going to be a messy, sticky couple of months while we figure this out, but know these three things:
Any contract or agreement you sign with an agent (whether selling or buying) is completely negotiable—from the length of time it’s valid to the amount of compensation
READ EVERYTHING an agent asks you to sign and ask questions. The consumer (that’s you!) has some responsibility here, and you need to know what you’re signing!
If it seems too good to be true (you’re paying a low compensation or not compensating a buyer’s agent)…just know it probably is. You should absolutely advocate for yourself and negotiate, but the level of service you receive and the amount of money you ultimately walk away with may be impacted by trying to shave money agent compensation.
Still have questions! EMAIL ME and let’s chat!
