As of August 17th, 2024, new procedures are in place for handling real estate commissions and how those commissions are promoted and disclosed. This real estate commission change is Nationwide and will undoubtedly impact real estate sales.
This comes as a result of several recent lawsuits with The National Association of Realtors. These new procedures have been put in place to better serve both home buyers and sellers by increasing transparency.
Home buyers are now required to sign a contract outlining the agent’s responsibilities and commission payment. Furthermore, the home buyer must now agree to pay their agent’s commission, unless the seller offers payment as part of the home sale.
While real estate commissions have always been negotiable and remain negotiable, the NAR settlement is bringing a lot of discussion about how real estate agents should be paid and who should pay them.
Impact of the Real Estate Commission Changes
The lead up to the NAR settlement and real estate commission changes was filled with nerves and questions. Would this turn the real estate world upside down?
While change takes time, the initial impact of the NAR settlement has been minimal.
Most agents have found that when they clearly communicate and explain home buyer and seller rights along with the services that a real estate agent will legally provide, clients have been receptive and positive. Greater transparency protects both the real estate agent and the client.
Furthermore, it’s essential that Realtors provide a detailed list of expenses that clients will incur when buying or selling a home. Both homebuyers and sellers should enter the process completely understanding every detail.
Know Before You Buy
As you go into the home buying or selling process, make a list of questions ahead of time, just as you would before visiting your doctor. Ensure you fully understand every part of the process and that your best interests are being protected. Buying or selling a home is one of your largest single investments, and it’s important to plan accordingly.
As with any legally binding contract, if you have questions, you should always seek the advice of an attorney. Real estate agents are not attorneys and, therefore, can never give legal advice.
Real Estate Commission Changes: What Home Buyers Need to Know
As a result of the NAR settlement, Realtors can no longer show buyers any homes without first signing a buyer-broker agreement. This agreement should clearly disclose the agent’s responsibilities and compensation. In addition, it should lay out who will represent the buyer throughout the real estate process.
Representation
Furthermore, it should explain Dual and Designated Agency, giving home buyers the choice up front as to whether or not they are comfortable.
Dual Agency is when the same Realtor represents both the home seller and the buyer. Generally, this is one agent that represents the buyer and a different agent that represents the seller. Each agent can then advocate for their client’s best interest. When one agent represents both sides, they must work on behalf of both the buyer and seller for the best outcome.
Designated Agency is when different agents from the same brokerage represent the buyer and seller. In this case, the listing agent representing the home seller and the buying agent representing the home seller operate under the same umbrella. However, each agent is focused on the individual client.
Buyers should determine ahead of time what they are and are not comfortable with regarding agency and representation.
Compensation
Beyond outlining the responsibilities of the real estate agent, the buyer-broker agreement will also clearly state what the Realtor is charging buyers for their services and the duration of the agreement.
Before the NAR settlement, sellers offered to pay the commission of the buyer’s agent, and that commission would be listed on the MLS. As a result of the real estate commission changes, compensation cannot be listed on the MLS. Furthermore, home buyers assume responsibility for paying their agent’s commission if the seller does not offer the agreed upon funds.
Before signing with any buyer’s agent, do your homework. Make sure you’re comfortable with the agent’s services, experience, track record, and how they’ll take care of you as you embark on the home-buying journey. There is way more involved than simply opening doors.
Real Estate Commission Changes: What Home Sellers Need to Know
The real estate commission changes, as a result of the NAR settlement, have impacted how sellers communicate the compensation and concessions that they’re willing to offer.
It is no longer permissible for home sellers to offer buyer agents a commission through the MLS.
It is still completely legal for home sellers to offer a buyer’s agent commission, just not through the MLS.
Sellers must decide what, if anything, they would like to offer to buyer agents to help bring buyers to their homes. A seller can decide this at the time of listing or at the time of offer negotiation. If a seller chooses not to offer a buyer agent commission upfront, it may still be something that the buyer asks for during negotiations.
Home buyers have to bear the expense of a down payment, closing costs, inspection fees, and moving expenses. Adding a commission payment to their Realtor ontop of those costs can be a bit daunting and even impossible for some.
As a seller, consider who your buyer is and be open to covering the buyer’s agent’s fees to get the deal done.
And make sure you work with a great listing agent.
For Both Home Buyers and Sellers:
Real estate commissions are not fixed and are completely negotiable between you and the agent you choose. If you do not fully understand the new procedures or any part of the home buying and selling process it is always recommended that you seek legal advice.
5 Steps for Buying a Home
Here’s a quick rundown of the steps for purchasing a home in today’s market.
1. Figure Out Your Finances
Get your finances in order and determine how much cash you have for purchasing a home.
Get your loan preapproved so you can go into the home buying process with your eyes wide open on the financial side.
Determine exactly what price range you want to stay under to keep your monthly payment where you’re comfortable.
2. Find Your Realtor
Do your research on a few local Realtors and choose a few to interview. It’s essential to talk to several agents to figure out who will best meet your needs and fit your personality.
Meet with them in person or over the phone and determine who you feel most comfortable working with.
3. Sign
As a home buyer you now need to sign a buyers agreement prior to viewing homes. Make sure you read every detail and ask how long the contract is in effect.
4. Let the Home Search Begin
It’s time to start looking at homes.
Ask your Realtor to check with listing agents prior to viewing a home to see which sellers are offering buyer agent commissions. Then you can determine if the home fits within your budget and what steps you may want to take when negotiating.
5. Make an Offer
Finding the right home is not only about criteria but also about how it makes you feel. When you find a home that fits you, make an offer and begin negotiations.
Final Thoughts
In today’s market, it’s tough to find the right home, but not impossible. With an expert real estate agent by your side, you’ll be able to navigate the housing market and discover your home.
Remember, to be upfront and honest with your agent regarding responsibilities and compensation. The real estate commission changes have opened up a lot of discussion around compensation. As a home buyer or seller, it’s essential to understand what you’re agreeing to and what you’ll be expected to pay.
If you're looking for a real estate agent to help you with either buying or selling a home in Roanoke, VA, Salem, VA, or surrounding locations reach out to The Crouch Team and they'll help you through the process. As a native of Roanoke, Virginia, Christy Crouch leads her family team in helping families buy and sell homes and has been since 1991. If you're looking for a great local Realtor reach out to them.
