In 17 days, or August 17th, the buyer broker agreement will change the way we transact real estate throughout the USA changes.
Business will no longer be “As Usual.”
That means home sellers, home buyers and real estate agents across the county will figure this out together. It won’t be easy for some folks, but I’ve attended over 35 hours of training with my brokerage, the National Association of Realtors (NAR), and our local MLS to understand how best to implement the buyer broker agreement and this new way real estate will transact.
Most speculate it’ll take the rest of 2024 to get comfortable with the changes.
That’s because the real estate industry will become “consumer-centric.”
Let me start with this over-arching comment: no home-buying consumer will be looking at property with their buyer agent without signing a buyer-broker agreement in advance. So, if you don’t want to sign one with me prior to seeing property, going to another agent will not solve this step – one that the law stipulates must happen.
Think about it this way, when an agent meets with a homeowner to list their home for sale, there’s a presentation and discussion about the listing compensation, marketing strategy and a handful of other important steps that will take place.
The Buyer Broker Agreement, Buyer Representation and Consumer Focused
But with buyers, that hasn’t been the case – until August 17th. Buyers will now experience their buyer agent presenting them with why they should choose this agent, what services will be provided, and what compensation both agree upon. It’s now going to be a relationship that’s established before the action begins.
Now, this buyer broker agreement doesn’t need to be exclusive to start – it can be non-exclusive. That will allow the buying-consumer to see how they like this agent and get to know, like, or trust them. Or, if trust is established right away, an exclusive buyer broker agreement can be established.
Here’s the kicker, as a home-buying consumer, you have the right to choose how to work with your agent. And your agent will now share their home-buying service options for you. For example:
- Do you want a 30-day or 6-month agreement?
- Do you want to go property-by-property?
- Do you want to go non-exclusive?
- Do you want full representation or choose from a menu of option?
- How do YOU want to proceed with me?
This will be new for both buyer-agents and buyers. It’ll the first time the conversation “about the money” comes up with buyers. Yes, how will the buyers agent get compensated. And in that conversation is the talk about “how the money works” in a real estate transaction.
- The buyer broker agreement will allow for more thorough and transparent conversations to take place between agent and their customer.
There will be convos about compensation and concessions. These are not the same things. And not every seller will provide these. Rather, the buyer will need to stipulate what they want as part of their offer to purchase.
Before you continue, you may want to save this and this link where I wrote about these buyer broker agreement changes that are about to take affect.
The Buyer Broker Agreement is about Negotiating 101
It all comes down to Negotiation 101. Think about this, “Why would a seller advertise what they’re willing to do in advance of someone making an offer first.“
In decades past, buyers and their agent rarely talked about the money as it was assumed the seller took care of it. Not anymore. And the days of a buyer calling an agent saying, “I want you to show me this, this and these properties” and expecting it to happen without a conversation of how that takes place in our new world, is over.
On August 17th, a buyer-agent will share their buyer broker agreement in a consultation with their buying customer.
In the new real estate world, working with a buyer comes down to the services the buyer is receiving from their buyer agent. It could be a la carte, or as it was in the past – full service. It comes down to what the consumer, you, wants.
It’s similar to how listing agents work with their sellers over the years. There are different service offerings, or a menu, available to home sellers: various levels of marketing plans – bronze, silver, gold levels for example. Each offer the seller different levels of service and compensation.
The same should happen with buyers. An agent could/should offer buyers various service levels (menus) so the buyer can choose what they’d like.
So, in the buyer broker agreement are references to “if you don’t want ‘this level of service’, perhaps you won’t get my representation. So, would you full representation in this transaction? If you don’t, you may not get access to vendors, or get an inspection, or negotiation help.
What If a buyer goes direct to the listing agent? They will lose out on a menu of items – is that what you want, or do you want full buyer- representation?
The buyer broker agreement solves a lot of those unknowns.
Think about it this way, America is a high-service society. We spend more money to have food delivered to us. We want high level of service wherever we go. Most homebuyers don’t want to find their own properties, or sort thru all the layers in the process, or have to negotiate with the listing agent who may be highly skilled, and the buyer isn’t. Other buyers want to do all that work.
For listing agents and their sellers, the word, flexibility, stands out. A seller or their listing agent will not know what a buyer needs to complete their transaction. So, there’s no need to stipulate what the seller is offering as the seller has no idea what a buyer may want or need. Allow that process and conversation to flow at the time of negotiating.
A Consumer-Centric Approach via the Buyer Broker Agreement
Sellers will no longer offer of compensation in the Multiple Listing Service (MLS). That option will be removed and is against all new laws. Instead, the buyer and buyer-broker in their relationship will establish a fee between the two of them. They will include that in the offer so it becomes part of the purchase price between the seller and buyer directly. In this manner, the principles (consumers) get to negotiate the terms of that contract and how compensation fits into that contract.
In this process, it’s consumer-centric, and has nothing about brokers sharing compensation.
Here’s how a conversation with a buyer agent and their buyer may look like after they sign their buyer broker agreement:
“I only work with written agreements – so any agent who follows the NAR Code Of Ethics is also going to have you sign an agreement before seeing properties. If they don’t, then they are violating important rules designed for your protections.
Here’s my Non-Exclusive Agreement. In it is the fee I charge. And here are the services I’ll provide for that fee. When we put in our offer, we’ll include that as part of it and we’ll negotiate with the seller to pay us that amount. I’ll show you every property you want to see. Then we’ll put an offer in with that request on any property you’d like to have.
It doesn’t matter to me what the listing agent says or whether they’re offering anything in terms of concession of an offer of compensation. We will include that amount in the offer we make, and we begin negotiations.
So, hopefully we have a good agent who has properly prepared the seller to understand this process and that we’ll be including this request in our offer…”
As far as the non-elusive agreement, here’s a thought my mentors and I believe in – don’t work with any agent who tries to stick you to an exclusive agreement or tries to get you to exclusively working with them without knowing that you DON’T need to do that. In other words, you have choices.
The Buyer Broker Agreement Will Be Law
In the spirit of this entire new law and the buyer broker agreement – everything is happening for the benefit of the consumers: buyers and sellers. And not for the agents.
What’s the difference between the seller paying buyer agent fees via a purchase agreement vs. a concession towards the buyers closing costs. Any advantages? Disadvantages?
Keep it simple.
Tell seller in the purchase agreement, “seller is to pay X Realty X% of the purchase price at the closing.” This verbiage is not an “interested party contribution.” So this verbiage is ok. It’s ok for the seller to pay the buyer agent via ther contract. This will show on the Closing Statement that lenders and FanneMae are approving. That the seller is paying the broker for the buyer directly on the seller side.
This is transparent. Everyone sees exactly what’s happening in how and where the money flows and “how the money works.”
This is my 4th essay on the Buyer Broker Agreement issue. I write these to help you understand what’s going on so we can work together with open communications and get through your sale or purchase of a home.
We will fumble around for many months, but it’ll get better. It’ll become consumer-centric and it’s my belief that it’ll serve you and me better moving forward.
Questions? Call me at 561-777-4089 and let’s talk about this.
