The Department of Justice, MLSs nationwide, and the NAR have "agreed" (via lawsuit) to changes in buyer-agent compensation. They are going into effect on Monday, August 12, 2024.
If you are a buyer:
1. An agent working with you as a potential buyer can NO LONGER show you any properties without a signed buyer-agency contract. That contract will specify what the agent will do for you, how long that contract will remain in effect, and how much that agent will be paid. Very much like a listing contract. All of us are in the same boat here. Here is the buyer agent contract that Gibson Sotheby's International Realty will use.
2. How long will the contract last? We don't know what will become the norm, but I would say 90 days. If you are just starting out with an agent, it would be possible to "date" them (i.e. have a short contract term) for a chosen short timeframe to see if you like working with them. This is a committment to work with a particular buyer-agent exclusively for that period. If, after that period, you purchase any of the properties you have seen with them, you will be legally obligated to purchase it with them for 90 days. following that.
3. Will buyers always be paying buyer broker compensation? NO! Sellers will have the option to decide if they are willing to offer compensation as part of the price, and how much. However, as part of the DOJ settlement, they are not permitted to advertise how much that will be in MLS. Buyer-agent compensation from sellers will now be specified in offers to purchase. It will be up to the seller to choose the offer that nets them the most money and is most likely to get them to the closing table, meaning the cleanest offer. Just like it did prior to 8/12.
3. Will the buyer-agent be able to collect more than the fee stipulated in the contract if the seller is willing to include the buyer-fee? No. If the buyer has signed a contract at 2.5% and the seller has agreed to pay 1% to a buyer agent in the offer, the buyer agent cannot collect more than the 2.5%, so the buyer would pay 1.5%.
3. Buyer-agent compensation can no longer be displayed in MLS under the terms of the DOJ settlement. One of the suits centered around sellers being "forced" to pay buyer-agent commissions. Whatever you think about that, it's not happening anymore. It's all negotiable between the buyer and seller. So basically, there is less information being offered to buyers. Some sellers may still attempt to publicly offer compensation, but they are exposing themselves to possible lawsuits or prosecution.
4. Who has been paying the buyer agent commission for all these years? It's a misconception that the seller has been paying the fee. The buyer has all the money. They pay everything that is on the settlement sheet, and that money gets disbursed to the seller, the banks, the listing broker, the attorney, and everyone else. The listing broker disburses the commission to the buyer-broker. The commission has been included in the price, so the buyer was able to finance it. In most cases, depending upon the listing, I would have split the commission equally with the buyer-agent.
5. So who will pay as of 8-12? The difference essentially is that the buyer agent fee will not be baked into the price, unless the seller is willing to include some of it as part of the transaction. Otherwise, as of next week, buyers will not be able to finance the buyer-agent fee if paid separately, on top of the price. There are possible workarounds, such as seller-provided closing costs (may vary with lender) but if the seller is not including the fee, buyers more than likely need to write a check to their buyer-agent at closing. Which, If you buy an $800,000 property means that you will need to cut a check for $20k (if 2.5%) to the buyer brokerage. This would be on top of the down-payment. Sellers will need to decide what their best course of action is when reviewing an offer. Once again, it seems obvious that the negotiated terms will include the highest net (whether or not there is a fee involved) and the terms that are most likely to get the transaction to the closing table. I am hopeful that it becomes the norm that sellers will be willing to include the fee in the price as part of the transaction, or offer some closing credits to the buyer, but we don't know yet.
6. What if you only want to deal with listing agents and not have a buyer agent? If you are a buyer, more than ever, you definitely want to work with someone who has hundreds of transactions of experience, who is prepared for these changes, who is an expert negotiator, who has the obligation and ability to guide you through property identification, negotiations, referrals to attorneys, inspectors, contractors. Someone who has the hard-won experience of solving transactional problems to your advantage. Even the smoothest transactions have potential minefields.
I've had decades of experience. Here's more about me. Here are my endorsements. Here is more info about buyer transactions.
If you are unrepresented, and you, for example, go to an open house and want to make an offer, you will be asked to sign two forms. One is the mandatory agency disclosure, which acknowledges that you understand that the seller is the client of the listing agent, not you. The other is the Unrepresented Buyer Disclosure. The listing agent has an obligation to divulge all information about you and owes all confidentiality as well as all the other fiduciary obligations to the seller. The listing agent has the obligation to get the best price and best terms for the seller. Period. The listing agent can fill in whatever you want on the offer but cannot advise you. They cannot recommend inspectors. They cannot help you solve inspection problems or any other kind of problem. If you do want client-level representation, the listing agent can refer you to someone in their office. That person will be required to have you sign a contract.
Has this settlement made the homebuying process easier, more transparent, or less expensive for the average buyer?
No. I believe it has tipped the scales more in favor of the cash buyer, and notably investment buyers and institutional buyers. Even if you disregard buyer broker compensation, it is difficult to believe that in our local market it will make any difference whatsoever in selling prices. I believe that there is actually less transparency and more expense for the average buyer.
