In March, I wrote about the National Association of Realtors Settlement and the upcoming rule changes. These changes have now arrived. For details on the settlement, you can read my article in the blog section of my website. The new rules take effect on Aug. 17th, though Arizona’s multiple listing service (MLS) will implement them on Aug. 1st. So, what’s changing, and how will it affect buyers and sellers?
SELLERS
Previously, sellers agreed to the commission for both listing and buyer’s agents when signing the listing agreement, with the buyer’s agent’s commission clearly listed in the MLS.
Moving forward, buyers are now obligated to pay their agents’ commission, which is now referred to as compensation. They are required to sign a contract with their buyer’s agent prior to viewing homes, agreeing to terms including the agent’s compensation.
Some sellers interpret this as meaning they no longer have to pay the buyer’s agents compensation, which is technically correct, but it has always been that way.
Commissions have always been negotiable; sellers could use discount services such as the one flat rate of $995, or 1% listing fee or do a For Sale by Owner. Those options have not changed. It is up to the seller whether they choose to offer the buyer’s agent’s compensation or not.
The thing to consider is that by not offering compensation you may be making it more difficult for a buyer to afford to purchase your home.
This is a discussion to have with your Realtor at the time of listing your home.
BUYERS
Buyers must now sign a contract with a buyer’s agent before viewing any homes. This Buyer-Broker Agreement outlines the terms and agent’s compensation, which can be a percentage of the purchase price, a set fee, or another agreed-upon amount. Buyers are now obligated to pay their agent’s compensation, whereas it used to be the sellers who paid it.
However, buyers won’t necessarily pay out of pocket. Sellers may still agree to pay the buyer’s agent’s compensation. If compensation is not offered by the seller upfront, or the amount offered does not cover the agreed-upon amount between the buyer and the buyer’s agent, the agent can negotiate the compensation during the offer stage.
Any compensation offered by the seller will be used toward the agreed compensation written in the BuyerBroker Agreement. For example, if the Buyer-Broker Agreement states a 2.5% commission and the agent negotiates 2% from the seller, the buyer owes only the 0.5% difference. If the agreement states 2% and the seller offers 3%, the extra 1% is credited to the buyer to go toward closing costs or other fees.
Previously, buyers could connect with several Realtors, especially through internet sites such as Zillow and Realtor.com, and see homes with each one. Moving forward, buyers must sign the contract prior to viewing any homes. The term of the contract is negotiable and can be for one particular house or a set time period.
You want to find a Realtor who is a local expert and one of the top agents in the area. They need to be someone you trust and feel comfortable with, as you may be spending a lot of time working together.
Avoid choosing an agent solely based on a recommendation from a family member or friend. Your husbands, sisters, girlfriend’s mother’s daughter may not be your best choice unless you have personally vetted them. Just like selling a home, buyers need to interview agents prior to committing to one and signing the contract.
It has never been more important for buyers and sellers to choose an experienced, local, and professional Realtor to help guide and advise them through these changes. Take the time to research a Realtor, look at their website and online presence, and read reviews.
While this is a significant change for everyone, including Realtors, we are all working together and committed to finding the best ways to move forward with the new rules and regulations to ensure that the real estate process remains smooth and efficient.
As the market adapts to these new regulations, it’s crucial for both buyers and sellers to stay informed and proactive. Talk with your Realtor, ask questions, and make sure you understand the implications of these changes on your specific situation.
In summary, the new rules bring a shift in how buyer’s agent compensation is handled, requiring buyers to take a more active role in compensating their agents. This change emphasizes the importance of clear communication and mutual agreement between buyers, sellers, and their agents. By working closely with a knowledgeable Realtor, you can navigate these changes effectively and continue to achieve your real estate goals.
Please don’t hesitate to contact me if you have questions on the new rules and regulations, and how they will impact you.