“Should I wait to buy till after July when the settlement is finalized and sellers no longer have to pay for a buyers agent commission?”

That’s the main question I’m getting right now from buyers. It’s understandable, with all the national headlines that make it sound like prices will drop dramatically once the settlement is finalized. Well, I previously wrote a whole blog on the fact it doesn’t look like prices will drop just because of the settlement. This is due to many reasons, but mainly because sellers aren’t really gonna drop the price just because they are saving a couple thousand dollars.

The value of a house is the price someone is willing to pay for it… period. That has not changed.

But if prices are probably not going to drop, what other things in the settlement affect buyers and how can buyers position themselves to take advantage of the new rules?

SHOULD BUYERS HIRE AN AGENT?

First off, with the seller no longer being required to pay the buyers agent commission, buyers will most likely have to pay their agent themselves.

Remember that the settlement just removes the requirement of the seller to pay the buyers agent commission and removes that offer of compensation from the Multiple Listing Service (MLS). But it doesn’t say that the sellers CAN’T pay the buyers agent commission. So sellers can, and should in some situations, still offer to pay some or all of the buyers agent commission.

Why? Because that may encourage buyers to put in offers on their property. Or it could protect the seller legally by making sure the buyers are represented by a knowledgeable local agent who looks out for their interests.

But no matter if a seller offers to pay the agents commission or not, buyers will need to hire an agent before looking at properties. So how do they do that? Pretty much the same way they do it now.

1. Represent yourself (no agent). Definitely not recommended! But if you have a lot of experience purchasing properties, know the paperwork and how to fill it out to make sure you protect your needs and interests, and understand all the local laws related to real estate and the ability or restriction for building and adding onto the property… then this option might work for you. You need to weigh the risk against the money you may save. As an example, if the commission you would pay an agent equals to be around $15,000 then is that amount of savings worth risking the $600,000 purchase or potential future legal fees?
2. Reach out to the listing agent directly. Just be aware that the listing agent represents the sellers and may have a conflict of interest if they represent both seller and buyer.
3. Interview local agents. While there are agents who specialize in buyer representation, any licensed agent can represent a buyer. What you want to do is do some leg work… search online for customer reviews and their bio. Reviews can be found on Zillow and other websites. Then meet with them in person so you can ask questions.

ASK QUESTIONS

However you decide to pick an agent, please don’t just settle with the first one you meet. This is an important choice, and you should find out if the agent has the experience, knowledge and temperament to represent you. So when you meet with them, ask them some questions to get to know them a little better.

Here are some examples of questions to ask:
– How long have you been an agent?
– How long have you lived in the area?
– Do you work alone or do you have a team?
– What is the #1 thing you think a buyer in this local area should know before purchasing?
– What references do you have and can I contact a past client of yours?
– How do you help buyers compete in this market?
– What is your preferred communication method?

Of course with the changes proposed in the settlement, the last question will need to be: “How much do you charge for buyer representation?”

BUYER BROKER AGREEMENT

Yup, you’re gonna need to sign a form to agree to hire the buyers agent. But this isn’t anything new. The buyers broker agreement forms have been around for decades. It’s just most agents didn’t make their clients sign one since the sellers paid the commission.

Wait a minute! Haven’t I been calling it a “buyers agent”? Why am I now saying “buyer broker”? This is because legally the buyer is signing an agreement to have the broker represent them. The agent is a representative of the broker and serves under them. The broker is the one who in the end will be responsible in any legal issues. But the public commonly just feels the agent is who they are hiring, so thus why I mainly use the term “buyers agent” instead of the broker.

Back to the topic… There are multiple forms that the agent and buyers can use for different situations. The forms go over more than just the payment of the commission from the buyer to the agent. It also explains the duties the agent has to the client.

As it stands now, here are the main items on the form that will need to be agreed to:

• Timeframe. When is the agreement in affect? This could be short, like maybe just 3 months. Or longer, like a year. No matter how long, there has to be a set timeframe for the agreement.
• Payment. It has to clearly state what the buyer will pay the agent (broker). This can be an upfront retainer fee, kind of like some attorneys charge. Or it could be that the agent only gets paid at closing (like it is currently).
• Location. You can also state if the agreement to pay the agent is just for 1 specific property and list the address. Or you could say the agent gets paid only if you purchase a property within a specific city, county, or state. If you leave it open ended, it could mean you have to pay the agent even if you end up purchasing way far away. So pay attention to this part to make sure it’s limited to the area you are hiring the agent to represent you in.

We anticipate changes to the buyer broker agreement forms once the settlement is finalized. This will allow text changes to align the forms with the new laws.

MORE TO COME

Since the settlement isn’t finalized yet, there are still some unknowns. Like will buyer agent commissions have to be a firm number, or can they be a percentage of the purchase price (like is common now). Our team will keep an eye on the settlement and once it’s finalized we will update our blogs to reflect the new laws and processes.