You may have read the headlines about real estate commissions and a settlement by the National Association of REALTORs. There's a lot of noise out there, so what does it mean to you as Buyers and Sellers?
The National Association of REALTORs reached a proposed settlement agreement in a class action lawsuit
last Friday that will impact the way compensation is negotiated/advertised in real estate transactions. The two primary changes, proposed to take effect this summer, are:
1. Buyer's Negotiate their Buyer's Agent Commission and how it gets paid.
2. The Sellers side will no longer advertise a Buyer's Agent commission in MLS.
So what does that mean to you?
1. Buyer's Negotiate their Buyer's Agent Commission and how it gets paid.
In order to do this, the settlement requires a Buyer's Agent to use a written buyer’s representation agreement, which ideally will outline what services the Buyer's Agent will be providing to the Buyer and what the cost of those services will be. Buyers will negotiate directly with the Buyer's Agent on what that fee for services will be.
As a Buyer, you can choose to pay your Buyer's Agent in a variety of ways:
1) Buyers can pay the agreed to compensation out-of-pocket, if their lender allows.
2) Or you can ask the Seller or Seller's Agent to pay for the agreed compensation. (Which is how it's been done for the last 30 years.)
3) Or maybe we get creative with other service/compensation models...
Basically, the Seller no longer decides what your Buyer Agent's compensation will be! We think this is a good thing! Island Living Homes welcomes and encourages this kind of transparency.
2. The second major change is that the Sellers side will no longer advertise a Buyer's Agent commission in MLS. This is driven by change #1, as now the Buyer decides how much they want to pay their agent and how they want to pay it.
The good news is that the Seller can still pay for the Buyer's Agent compensation, as it will most likely become a negotiated term on the purchase contract and not negotiated at the time the Seller and the Seller's Agent signs the listing agreement.
In the past, the Seller and Seller's agent would negotiate the Buyer's Agent compensation, and then post the compensation in the MLS. This will no longer be done. The Buyer will negotiate with their agent the Buyer's Agent commission and put it into writing.
The Buyer likely will ask the seller to pay for the compensation, like they have been doing over the past 30 years.
So when a Buyer makes an offer, it will include the price, closing date, who will pay for the survey, title among all the other terms. It may also ask for the Seller to pay "X apples" towards the compensation of their Buyer's Agent if the Buyer chooses to compensate their agent that way.
It will become a negotiated term in the contract. This is similar to how it's done in commercial real estate or in new home purchases.
All in all, we think these changes are pretty simple, and should not disrupt the day to day process of buying and selling of your homes. It just gives more transparency [and choice] to the process, which is a win in our opinion!
Give us a call if you would like any further clarification! We're always happy to help walk you through anything!