Buyer Commission Rule Changes
Thinking of buying or selling a home this summer? New rules are coming for buyer’s agents as a result of the National Association of Realtors (NAR) settlement. While the new regulation primarily affects buyers and the contracts they have with their agents, these changes also affect sellers.
Hot on the heels of the NAR settlement, we’ve seen sales in the Bay Area real estate market heat up. Multiple offers and sales prices over list have seen a dramatic uptick in the last few months.
NAR Makes History-Making Settlement
In case you missed it, the National Association of Realtors settled a class-action lawsuit in early April. It impacts the way real estate transactions are handled nationwide. Here are the highlights:
- Expected to take effect in August. The judge who presided over the lawsuit granted preliminary approval. The final settlement still needs court approval; a final approval hearing has been requested for November 26, 2024. Even so, some buyers are rushing to purchase a home before August.
Sellers will no longer be required to pay the buyer’s agent’s commission. Buyers will be responsible for negotiating their own commission fee with their representing agent.
Buyers will be required to sign a contract before looking at homes. The contract will outline the agent’s fees and responsibilities. Buyer agent commissions will no longer be listed on the MLS. Previously the MLS fields that showed commission percentages were only visible to agents.
Buyers Negotiate Commission
The Mercury News published an excellent article about the expected changes and how they could play out in reality. Essentially buyers, not sellers, will decide how much their agent will be compensated. Compensation will be specified in a contract between buyers and their agents before touring properties.
Customary commissions are between 2.5%-3.0% to each agent. One scenario for traditional loans would be to include the buyer’s agent commission in the offer price, stipulating that the seller pays their agent at closing.
For VA loans – guaranteed by the Department of Veterans Affairs – buyers aren’t permitted to pay real estate agents directly. The VA is “actively engaged with industry partners to establish flexible solutions” so veterans remain on equal footing in the homebuying process.
The Value of Representation
Technically, buyers could buy a house without representation. However, it’s not necessarily a money-saving strategy and is one that brings potentially high risks. Abraham Lincoln’s quote, “The man who represents himself has a fool for a client”, comes to mind. Here’s why:
- The listing agent works with the interests of the seller as their priority & has a fiduciary duty to the seller.
- Your buyer agent is focused on your interests & has a fiduciary duty to you as the buyer.
- Transactions managed by an agent save time and money. You’ll avoid pitfalls, unnecessary delays, and costly missteps as you have a knowledgeable guide throughout a complex transaction.
Investing in a home is one of the biggest financial transactions you’ll undertake. Avoid costly missteps and unnecessary delays by working with a knowledgeable and experienced guide. I can help you navigate these historic market changes.
Reach Out & Connect
I'm meeting with clients via phone, video conferencing, and by appointment. Whether you're looking to buy or sell, you need an experienced guide in this complex and fast-paced real estate market. I've helped hundreds of individuals like you successfully negotiate the most important financial transaction you'll ever make.
For buyers and sellers, I invite you to call me to discuss your situation and options.
