Okay, the new NAR rules and policies after the NAR settlement have been in effect for a few days now. What does this mean? To be honest, there’s still a lot to sort out, and with buyer’s agent commissions now open to the free market, it could take some time before we see how this all plays out. But here’s what we know so far:
Who Pays the Buyer’s Agent Commission Is No Longer Predetermined
In the past, sellers were typically expected to pay the buyer’s agent commission. That’s no longer a given. Before you even start looking at homes, it’s crucial to sit down with your agent and figure out how they’ll be compensated. Paying commissions is now a negotiable part of the home-buying process.
Buyer/Broker Agreement: Importantly, this commission must be agreed upon through a Buyer/Broker Agreement before you start touring homes. This agreement ensures you and your agent are on the same page about how they’ll get paid and what services they’ll provide. Think of it as laying the groundwork for your home search—without it, you might not even be able to start looking at homes.
Commission Details Are No Longer Listed on MLS Websites
Another significant change is that sellers and their agents can’t post whether they offer a buyer’s agent commission or how much that commission is on MLS (Multiple Listing Service) sites. The idea here was to prevent steering—where agents might push buyers towards homes with higher commissions. But let’s be honest: agents will still find ways to communicate, and with websites like Homekick.com allowing agents to share commission info legally, the original intent of these rules might get a bit sidestepped.
So, What Does This Mean for Buyers?
These changes could be especially tricky for buyers. When you’re on the hunt for a new home, one of the first things you do is find a real estate agent to guide you through the process. Maybe you get a referral from a friend, look online, or stick with an agent you’ve worked with before. But now, there’s an important question to ask before you start touring homes: Who is paying the buyer’s agent commission?
In the past, it was common for the seller to cover the commission for both their and the buyer’s agents. But that’s not something you can assume anymore. Before you can start looking at homes, you and your agent must determine how they’re getting paid and lock that down in a Buyer/Broker Agreement.
What's a Buyer/Broker Agreement, and Why Does It Matter?
A Buyer/Broker Agreement is a contract between you and your real estate agent. It outlines how your agent will be compensated, what services they’ll provide, and how long the agreement will last—typically about three months, but that can vary.
This agreement is crucial because, without it, your agent might be unable to represent you in viewing homes. The agreement ensures that your agent gets paid for their work, whether by the seller, you, or some combination of both. And if you don’t find a home within the agreed-upon period, you’ll need to renew or renegotiate the terms, which keeps everyone on the same page and committed to the process.
Let's Look at an Example: Meet Harry
Harry is getting transferred from the Midwest to Sacramento, CA. He’s a first-time homebuyer using his VA benefits, which means 100% financing, and he’s saved just enough to cover his closing costs and moving expenses. But here’s the catch—Harry doesn’t have extra funds to pay a buyer’s agent commission out of pocket.
Harry needs a buyer’s agent because he doesn’t know the area and will rely heavily on professional help to figure out where to live, what he can afford, and how to navigate the home-buying process. But what if none of the homes that suit Harry’s needs have a seller willing to cover the buyer’s agent commission? What are Harry’s options?
Navigating a Tough Situation (Some Options for Harry)
- Negotiating with the Seller: Harry could ask the seller to pay all the commissions as part of his offer. However, sellers might be less willing to do this with the market shifting, especially in competitive areas.
- Paying the Commission Himself: Harry could cover the commission himself if he had the funds. But let’s face it—that’s not an option for him.
- Seeking Alternative Solutions: Without seller-paid commissions, Harry might consider researching and contacting listing agents directly. This might save him on commission costs, but it also means he’d be flying solo without the dedicated representation he needs—not ideal.
- Relying on New Tools: Platforms like Homekick.com let Harry and his agent search for homes where sellers are willing to pay buyer commissions. This could limit Harry’s options, but it ensures he gets the professional help he needs without extra costs.
The Current Reality: Uncertainties and What We Know
Harry’s situation is just one example of the uncertainties buyers are facing right now. The real estate landscape is shifting, and while there’s still a lot we don’t know, here’s what we do:
Commission Payments Are No Longer Automatic: Buyers and their agents must negotiate how commissions will be handled. This makes it even more important to have a good agent who can guide you through these new waters.
Transparency and Negotiation Are Key: Both buyers and sellers must be clear about who’s paying what. Open communication and a solid strategy are essential, especially when entering a Buyer/Broker Agreement.
Professional Representation Is Still Essential: Despite all these changes, having an experienced agent is critical. They can help you navigate the new rules, negotiate on your behalf, and make sure you’re making informed decisions.
The Market Is Adapting: As the industry adjusts, new tools and platforms are emerging to help bridge the gap, but these solutions are still evolving and may not fully address every buyer’s needs.
Final Thoughts
For buyers like Harry, these changes in how buyer’s agents are paid create new challenges. The key takeaway? Working closely with a knowledgeable real estate agent who can help you navigate these challenges, negotiate effectively, and ensure you’re protected throughout the home buying process is more important than ever. The landscape might be uncertain, but with the right support, you can still find the right home for you.
