Will Sellers Stop Paying for Buyer Agents while YOU Foot the Bill?
The recent National Association of Realtors (NAR) lawsuit settlement has sent shockwaves through the real estate market. A core issue was the traditional commission structure, where sellers typically covered buyer agent fees. Although this practice is still currently the norm, this could soon change when the mandatory changes resulting from the lawsuit go into effect on August 17, 2024. Here’s what you need to know as a potential buyer:
From Seller-Funded to Buyer Beware:
For years, the NAR advocated for a commission structure where listing brokers shared their commission with the buyer’s broker and agent, often a 50-50 split . This meant buyers felt their representation was “free” since the seller’s broker paid the commission. Although the lawsuit challenged this practice, it was not eliminated. The main problem was actually with the requirement that home listings in the MLS (multiple list service) were required to show some amount of compensation offered to buyer agents. This made sellers feel that they had no choice regarding the sharing of the commission they are paying to their listing broker. If the settlement requirements remain unchanged when they go into effect they will result in a ban on disclosing any shared commissions amounts in the MLS. Bottom line, this will require listing agents to provide a more complete and transparent explanation to seller’s regarding their options related to offering shared commission.
Here’s how the shift could impact your wallet:
- The Seller Subsidy Shuffle: Sellers might be less inclined to automatically cover buyer agent fees. They could list their homes with lower commissions for buyer agents, or even zero compensation. This could leave the responsibility – and potentially the cost – of agent representation squarely on your shoulders. NOTE: Although this would be seriously poor judgement by the seller, that is the subject of a different article.
- The Rise of a La Carte Fees: The traditional bundled commission might be broken down into separate fees for various buyer agent services. This can be transparent, but it also means you’ll be paying directly for things like showings, negotiations, and paperwork – services previously covered by the seller commission.
- Locking in Potentially Higher Fees: Another requirement of the proposed settlement is that buyer agent fees be negotiated between the buyer and their agent and locked in by a buyer agency contract. Sellers paying for the buyer agent’s commission will not be permitted to pay more than that contract amount even if they were offering more. Therefore, it will be necessary for buyer agents to lock in contract agreement fees high enough to be profitable. Presently, buyer agents can agree to accept whatever the seller is offering, even if LESS than they would normally charge. With the proposed changes, buyers would have to cover the difference.
Why Choosing to Buy Without an Agent Can Cost You More :
You might be thinking of just not hiring an agent to help you buy your home. Going unrepresented can be risky. Here’s a look at why:
- Losing Out: A good agent can help you prepare an offer that not only meets your criteria and budget. but also checks enough boxes for the seller to make them choose yours. In the current market we’re in right now, this can be a valuable benefit of working with an agent and can make or break your ability to find and purchase you’re ideal home.
- Negotiation Nightmare: A skilled buyer’s agent can negotiate a lower purchase price, seller concessions, seller funded repairs and other various purchase terms, potentially saving you tens of thousands of dollars. Negotiating on your own can be stressful and lead to leaving money on the table.
- The Knowledge Gap: The real estate market is complex. An experienced agent can navigate legalities, paperwork, and market trends, ensuring a smooth and successful transaction. Going solo can lead to costly missteps, delays and possibly overpaying for your home.
Bottom Line
The lawsuit settlement changes are currently scheduled to take effect on August 17, 2024. You can avoid dealing with any of these potential negative implications of the settlement changes by BUYING BEFORE August 17, 2024. Doing so will allow you to take advantage of the current system and ensure you will be able to get the valuable Realtor representation you need. If you have any questions about this subject or would like to get started with the home buying process don’t hesitate to reach out.