News headlines are designed to grab your attention. They often mislead or tell only parts of the story, and you’ll have to read the entire article or do additional research to fully understand the topic. I invite all of you to call me and talk about the how the real estate industry and what that will the changes mean for you as a home seller or buyer. I listed some hot topics below that I have already discussed with several clients.
- The recent lawsuits that were brought against the National Association of Realtors (NAR) and some large brokerages from Home Sellers for conspiracy to set commission rates and require Home Sellers to pay Homebuyer’s agent commission
- Many feel that commission rates are set and force consumers to over pay
Here is what I would like to explain about the real estate industry and the quality for service I strive for with every client.
- You are allowed to buy or sell your own real estate, it is your choice to hire a real estate professional
- Real estate agents work without guarantee of compensation, they only get paid with a successful transaction at the close of escrow
- All commissions/compensation are negotiable and always have been
- When a listing is taken, the seller and their agent agree on the compensation for the listing agent and the buyer’s agent (often a percentage of the purchase price, but a dollar amount can be specified).
- The compensation can be evenly distributed between the agents or not, depending on the agreement with the seller and services offered.
- The amount offered to the buyer’s agent is called Cooperating Broker Compensation
- When a buyer works with a real estate agent, it is their agent’s responsibility to describe the agency between buyer and agent. This includes discussing how the agent will be paid.
- A Buyer Representation agreement clearly outlines how the buyer will pay for their agent’s service. This includes the buyer paying the agent directly or if anyone either than the buyer compensates the agent (such as the seller’s approval to offer cooperating broker compensation) that amount is credited to the buyer’s obligation
- The Buyers and their agent can agree to a percentage of the purchase price or a dollar amount. If the Cooperating Broker Compensation exceeds that amount, the buyer and their agent can have decide to have the additional funds applied towards the agent or credited to the buyer’s closing costs in escrow.
There is still a lot to be determined with the final settlement for NAR and how it will impact real estate agent’s practices. Here is what I believe will change:
- More homeowners and homebuyers may decide to conduct real estate transactions without representation. Those individuals will need to be well versed in the laws, contracts and practices to ensure success and reduce potential litigation.
- Buyer Representation and Broker Compensation Agreements will be required for every buyer
- These documents will outline how the agent will be compensated as well as provide a timeframe for buyer/agent representation
- Seller may stop offering Cooperating Broker Compensation and only pay the agent representing the seller
- Although headlines suggests that this will lower prices, it won’t. Most of the comparable sales that are used to determine the market value of a property had commissions factored in and a seller will not reduce their asking price when offering no buyer agent commission. Sellers will look to make more money and offer less to buyers and their agents.
- Buyers may need to compensate their agent in addition to the amount due to purchase the property.
- When Cooperating Broker Compensation (buyer’s agent compensation) was offered by the seller, it was rolled into the purchase price and was financed into the mortgage. This made it easier for buyers who applied their savings towards the mortgage down payment and closing costs.
- If no Cooperating Broker Compensation is offered, the buyer may need to pay agent their agreed upon amount in addition to the down payment and closing costs.
I am available to discuss all of the points above and any questions you may have. I work diligently for everyone of my clients and act with respect, integrity and honesty. It is an honor to earn your business. Let me know if I can help you in any way.