On August 17th, the way we transact real estate throughout the United States, changed for good.
On that date the real estate industry as we know it, is no longer “business as usual.” Far from it. I’ve spent over 45 hours in training from the National Association of Realtors, my local MLS, as well as my brokerage learning how to implement teh buyer broker agreement and new ways to transact with consumers.
You see, the real estate industry is doing one thing, it’s now becoming more consumer-centric.
That’s a great thing. But here’s the overarching theme about what’s happening. No real estate buyer is going to be able to go out with their buyer’s agent and look at property without signing a buyer broker agreement. That won’t happen. So, if you don’t want to sign it with me and you think you can sidestep this process and go to somebody else, they’re going to make you do the same thing. Why? Because this is now the new procedure. This is the way we now are going to be regulated in the real estate industry.
Homes Sellers and the Buyer Broker Agreement
Think about it this way. When a listing agent meets with a home seller who wants to sell their home, there’s a presentation. The agent shares what they plan on doing for marketing and the competitive market analysis for their home. They also talk about the compensation, what it’s going to cost the homeowner to list their property with that agent. This is the normal flow.
For buyers, that’s never been the process. But on August 17th, that changed. Now buyers will meet with their agent, review a whole list of services that they’re going to provide for the buyer: what they plan to do, how many properties you want to see, and they’re also going to talk about the compensation, what the buyer agent plans to charge the buyer for all this work.
It’s all about establishing a contractual business relationship with home buyers.
You don’t need to sign an exclusive buyer broker agreement right off the bat. As a matter of fact, I advise against that. You can sign a non-exclusive agent agreement to begin. That’ll allow you time to get to know, like, and trust this agent. If you know them and like them, most likely you’re going to trust them… or not. At that point, you might want to consider using an exclusive buyer agent agreement with that agency.
Choices in the Buyer Broker Agreement
And here’s the kicker. Buyers will now be able to choose how they want to work with their agent. So, when you meet your agent, the agent will now be able to offer you a list of services that they’re going to provide for the compensation you’re going to pay them. Your buyer agent will discuss money, about compensation and how money flows in a real estate transaction.
Buyer agents have never had to do this in the past. However, there are states where they require a buyer broker agreement.
Think about it this way. Think of yourself as a homeowner for a second. Now remember, this is all about negotiating 101 both with buyers and sellers. Real estate agents negotiate their compensation and what they get for that compensation with each home selling consumer.
Now, from a seller’s perspective, why would a seller advertise, in advance, for the things they’re willing to do without first getting an offer from a buyer? In the new world they’re not going to do that. It doesn’t make any sense in this consumer-centric world and process.
As for buyers, the days of you calling an agent and saying, “I want to see these 6 properties. Can you tour me around town?” Those days are over. The law will no longer allow that to happen.
Today, the buyer broker agreement must be in place first. The buyer agent will share what their services are and how they’re going to get compensated for those. So, in this new world, it comes down to what services are you going to get for the compensation you’re going to pay?
It could be a la carte menu. If you want to get AB or C, it’s that price or this percentage. If you want to get full service like you have over the last 20, 30 years, 40 years, it’s going to be a certain percentage. So, you’re going to pre-negotiate what services you the consumer wants from your agent and then negotiate that price or percentage.
It’s the same way it is with listing agents and home sellers. The listing agent meets a home seller and says, “I have a bronze package for 4.5%. A silver package for 5.5%. And my gold package is 6%.
For buyers, it comes down to the list of services you’re going to sign in your buyer broker agreement. It could be full representation like it always has been for a certain percentage. You could opt out of a lot of things. If you’re being offered a menu of items. For example, let’s say you don’t want the full representation. You only want your buyer agent to do the negotiations for you. That’s fine. That’ll be a certain compensation. But then you’re going to miss out on certain things like a handyman. Or I need a list of inspectors to do the inspection. Well, you didn’t sign up for that, so you’re not going to get those. It’s just like if you go into a restaurant, they have 500 things on the menu to choose.
Think about this. If you decide not to hire buyer representation and go direct to the seller and the listing agent, you might be staring down the eyeballs of a seasoned, skilled listing agent, and you are at a disadvantage. You might go back to your buyer agent and say, “I don’t like this. I want full representation, and let’s negotiate your compensation. See, there are options.
The Buyer Broker Agreement is All About Service
Each buyer has different levels of service they want. So, they’re going to be willing to pay for certain things and don’t want to pay for other things. It’s not one size fits all. In this new consumer centric world, negotiating is going to become normal.
No longer is the seller going to be offering compensation to a buyer’s agent in the MLS. Instead, the buyer and the buyer broker are going to agree upon services to be performed and how much. They’re going to take that information and provide it in the purchase agreement. When they make an offer to the seller, it’ll be a part of the purchase agreement and the price so that the seller and buyer can negotiate.
In this manner, the principles, or the consumers, get to negotiate the terms of the contract and how the compensation fits into the contract.
I’m not concerned about what the listing agent and seller have agreed to in terms of what concessions or compensation they’re willing to pay. It doesn’t matter to me because you and I will write up this offer that’s going to include my compensation. It’ll be bundled as a package, and we’re going to present that to the listing agent and seller. The will see our buyer broker agreement.
Now, hopefully when we present your offer to the seller, the listing agent has informed their seller exactly how the flow of money works in the transaction. If they’ve done a good job and we’ve done a good job, consumers will be happy.
Now, here’s a word of caution or maybe even a little bit of advice for you.
Don’t allow a real estate agent stick you with an exclusive buyer broker agreement right away. It’s not mandatory. Ask them if they have a non-exclusive because you want to get to know, like, and trust them first, then build a relationship.
We’re all in this together. We’re going to fumble. We’re going to make mistakes so have patience. We’ll get through it.
Just know the buyer broker agreement has been in effect in 18 states. It’s the other 32 states who are seeing the most change. I’m confident consumers will see the value in these new procedures… it just may take a while to get used to the changes.
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How The BUYER BROKER AGREEMENT Changes Real Estate For Good. Now buyers MUST sign a Buyer Broker Agreement BEFORE shopping for homes with your agent. Its been like this in 18 states for years, and now ALL 50 states will be on the same page. It affects homes buyers, home sellers, and real estate agents across the country. The buyer broker agreement is consumer-centric and is a win-win-win for all in real estate.
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