Settlement Brings New Rules for Buyers
Ben Richardson
Recent headlines have abounded about the recent National Association of Realtors settlement that went into effect August 2024. What Does it Mean for Buyers?
Once the kids are building nests of their own and the family home becomes more than is needed or desired, folks often look to downsize. When it comes to buying a home today, things are a little different thanks to the recent NAR settlement.
What do you need to know as a buyer?
Most are familiar with signing a listing agreement contract, but now when a buyer wants to be represented by a broker, they must sign a buyer representation agreement contract. These can be exclusive or nonexclusive.
One eye-popping change is that a broker must have this agreement in place before showing a buyer a home. No agreement, no showings. This is a big change in the industry, especially for buyers who aren’t aware of or used to it. These contracts spell out exactly how the buyer’s agent will be paid and the agent’s duties. As always, everything is negotiable. Keep in mind that a buyer can still pop into an Open House with no agreement.
Another big change is that buyers are now responsible for the commission for their buyer’s agent. Previously, and typically, the listing agent shared the commission with a buyer’s brokerage and that covered both agents. A big concern is how buyers are going to come up with the extra money to pay their broker. Most have saved for years for the downpayment, plus closing costs, and now the additional expense of the commission is an issue.
Fortunately, there are options available to the buyer. Although there is give and take, essentially the choices are:
1. Sellers can still offer to pay the buyer’s agent’s full commission.
2. Sellers can agree that their listing brokerage will share part of the commission with a buyer’s agent.
3. Buyers can try to negotiate with the sellers’ to pay their buyer’s brokerage compensation.
Please keep in mind that buyers will need to cover any shortage if it varies from the agreed upon fee in their Buyer Representation Agreement. Of course, if the buyer has the funds, they may choose to simply pay the fee themselves. That might be the strongest offer possible in a hot sellers’ market. For most sellers, it’s all about the NET.
Be prepared for more negotiations in a real estate transaction moving forward. How a seller will respond to an offer that requests the seller pay a buyer’s agent commission will depend on market conditions and motivation. Some may be more than willing to pay the buyer’s agent commission, but others might not.
The market, whether it’s a hot sellers’ market, a slow buyers’ market, or somewhere in between, will play into the negotiation process more than ever.
Be very thoughtful about your approach. Know the current market temperature, and then decide which option best helps you reach your goals. Arm yourself with an experienced Realtor who is open to answering questions and having clear conversations. Together, you can make your move less stressful and more successful.