In light of the recent settlement between the National Association of Realtors (NAR) and the plaintiffs represented by class-action attorneys, home buyers need to be aware of new rules that will take effect nationwide on August 17, 2024.
Here’s what you need to know to navigate this new real estate landscape:
New Requirements for Home Buyers
- Written Buyer Broker Agreement: Before touring properties, buyers must sign a written buyer broker agreement.
What Should Be Included in the Buyer Broker Agreement?
- Broker Fees and Commissions: Clearly outline all broker fees and commissions.
- Compensation Details: Specify the amount the buyer agent will be compensated, either as a percentage or a flat fee.
- Compensation Method: Explain how the buyer agent will be compensated (e.g., seller subsidy, buyer payment, or a combination of both).
- Exact Compensation: Include language stating that the buyer agent cannot receive more compensation than what’s outlined in the agreement.
- Agreement Period: Set a start and end date for the agreement.
- Termination Terms: Define how the agreement can be voided.
Suggestions Not Required by the NAR Settlement
- Service Provided: Ask your buyer agent to provide a description of the services they offer.
- Communication Preferences: Find out your buyer agent’s preferred method of communication (text, email, or phone call).
- Availability: Ideally, your agent should be available to tour properties on short notice and respond to your questions promptly.
The NAR settlement has given rise to discussions, with interpretations that may not fully explain the settlement’s nuances or impact on consumers. NAEBA has addressed the misconceptions here.
The NAR Settlement and Dual Agency in Real Estate
Dual agency occurs in real estate when one agent or one brokerage represents the buyer and the seller in a transaction. In order for dual agency to occur, the seller and the buyer would need to agree to limited services and sign a dual agency agreement.
For home buyers, dual agency is particularly disadvantageous. Remember, the seller already has a signed agreement with the listing agent and brokerage. The agreement states the listing agent will act as a fiduciary, obtaining the best terms and price for the seller in contract negotiations. When a buyer agrees to dual agency, they agree to limited services from the listing agent or brokerage.
To avoid the dual agency dilemma, consider working with an exclusive buyer’s agent. Exclusive buyer agents work for brokerages that never work for sellers. These real estate professionals believe home buyers deserve 100% loyalty from their buyers’ agents.
The NAR Settlement and Open Houses
You don’t need to sign a buyer brokerage agreement to visit an open house. Open houses give buyers the opportunity to evaluate a property and the neighborhood.
Here are a few tips for home buyers when visiting an open house.
- All the agents at an open house work for the sellers best interest. Traditional real estate agents work for buyers and sellers. Depending on their client, an agent could say they are a buyers agent, a listing agent, an agent on a team or a broker. If you meet a buyer’s agent at an open house, that real estate agent works for the seller.
- Don’t overshare with the agent at an open house! The listing agents will ask questions but remember they work for the seller. Any answers you provide will be passed along to their client, the seller.
- Oftentimes, the agent at the open house is not the listing agent but rather a real estate agent with the brokerage hoping to meet unrepresented buyers.
- If you have a signed buyer brokerage agreement with an agent, write the agent’s name on the sign-in sheet at the open house. Otherwise, you will be contacted by an agent with the listing brokerage and asked if you want to work with them.
The National Association of Exclusive Buyer Agents (NAEBA) remains dedicated to educating home buyers and ensuring they are well-prepared for these changes.