- 🗓️ Home buyers will set their agents’ commissions starting Aug. 17.
- 🏠 Buyers must sign an agreement before touring homes.
- ✍️ Longer-term contracts are required when hiring a buyer’s agent.
- 💰 Agent’s pay can be a flat fee or a percentage of the home’s price.
- 📑 Contracts will cover pay, duration, and geographical area.
- 🛠️ Buyers can negotiate agent fees and additional contract elements.
- 💵 Sellers can be asked to pay the buyer’s agent commission.
The New Paradigm for Home Buyers
The home buying process is undergoing a significant transformation starting Aug. 17. With a landmark legal settlement, home buyers will now have unprecedented control over their transactions, particularly regarding agent commissions and contractual obligations. This shift aims to bring more transparency and fairness to the home buying experience. Let’s delve into these crucial changes and what they mean for you as a prospective home buyer.
Setting Your Agent’s Commission
Traditionally, home buyers did not have much say in how their agents were compensated; it was often the seller’s responsibility to pay the buyer’s agent. However, from Aug. 17 onwards, buyers will dictate their agents’ commissions. This change brings both freedom and responsibility:
- Understanding Commission Structures: Buyers will now negotiate commissions, which can be flat fees or percentages of the home’s price. For example, a 3% commission on a $400,000 home translates to $12,000, while a 2.5% commission would be $10,000.
- Negotiating Power: The ability to negotiate commissions empowers buyers to seek better deals, potentially saving thousands of dollars. Experienced agents may demand higher rates, so it’s crucial to be informed and prepared for these discussions.
Mandatory Agreements Before Touring Homes
An essential part of the new regulation is the requirement for buyers to sign an agreement before they tour homes:
- Touring Agreements: These could be short-term contracts that last a day or cover just a single home tour. This setup not only safeguards the agent’s time and effort but also allows buyers to “test out” their relationship with the agent without long-term commitment.
- Virtual Tours and Open Houses: Even with virtual tours, agreements must be signed. However, open houses are an exception; buyers can visit without signing an agreement as the seller’s agent manages these events.
Long-Term Contracts
When the home search intensifies, buyers will sign more detailed, long-term agreements, variously termed as buyer’s agency agreements, buyer-broker agreements, or buyer representation agreements:
- Defining Responsibilities and Pay: These contracts outline the responsibilities of the agent and specifics on payment. Such agreements were previously required in some states but will now become a standard practice nationwide.
- Flexibility in Terms: The agreements can differ in duration, geographic scope, and other specifics, making it essential for buyers to read and understand all terms before signing.
Negotiating the Contract Elements
Apart from the commission, several other aspects of the agent agreement can be negotiated:
- Duration of the Contract: The duration is often negotiable. While agents might prefer longer terms (for example, 90 days), consumer advocates suggest negotiating for shorter periods (30-60 days) with options to renew if necessary.
- Additional Fees: Watch out for additional fees such as administrative fees, brokerage fees, or other charges. These can add up, and it’s advisable to negotiate them out of the contract.
- Geographic Scope: Ensure the contract only covers the areas you’re interested in and avoid overextending the geographic scope.
Seller Concessions
An exciting aspect of the new regulation is that buyers can request sellers to cover their agent’s commission:
- Incorporating Commission into Offers: For instance, when making an offer, buyers can include a clause requesting the seller to pay the agent’s commission. This can be highly beneficial, especially when coupled with limited budgets.
- Seller’s Advantage: From the sellers’ perspective, agreeing to cover the commission can make their property more attractive to buyers, potentially resulting in quicker and more favorable sales.
Practical Tips for Buyers
To navigate these new changes smoothly, here are some practical tips:
- Research and Preparation: Understand different commission structures and be ready to negotiate.
- Professional Advice: Consider consulting a real estate lawyer to understand the full implications of your agreements.
- Comparison and Selection: Don’t rush to sign with the first agent. Compare different agents and negotiate terms to find the best fit for your needs.
Final Thoughts
These changes signify a move towards greater transparency and buyer empowerment in real estate transactions. By setting commissions, negotiating contract terms, and having the option to request seller concessions, buyers are in a stronger position than ever. However, this increased control also requires buyers to be more informed and proactive throughout the home buying process. Stay educated, negotiate wisely, and leverage these changes to make the most out of your home buying experience.
