Buyer Beware: The process for buying a home is about to change This Spring, the National Association of Realtors (NAR) agreed to do away with rules that have for decades caused agent commissions to be paid by the seller. This agreement will help to settle lawsuits against NAR that claim that the rules have caused sellers to pay artificially inflated costs to sell their homes.  Right now, the seller of a home typically pays both the seller's agent and the buyer's agent commission. This settlement could potentially change that, opening up the door for the buyer to pay their buyer's agent commission if the seller isn't offering one or is offering a reduced buyer's agent commission.  While the settlement is not completely finalized, NAR has agreed to implement the changes effective August 17th and it will result in the biggest change we've seen in the real estate industry in decades.  Two important parts of the settlement will result in changes in the process of transactions and potentially how commissions are paid to Realtors: Buyers are going to be required to enter into an exclusive buyer's agreement (also called a buyer-broker agreement) with a Realtor before they can start looking  at properties. While these types of agreements have been around for a while, previously, they weren't required, but that will soon change as of August 17th 2024 and many brokerages will be implementing this requirement earlier.  The multiple listing service (MLS) where properties are listed for sale will not be allowed to include any seller compensation information for buyers' agents. This does not mean that buyers' agents won't be compensated. They can still be compensated in multiple different ways, but the information can't be listed on the MLS.  In this blog post, we're going to focus on buyer-broker agreements. Some real estate agents already ask the buyers they work with to sign an exclusive buyer's agreement, while others do not. Soon, it will become the norm and the law, and both customers and agents will have to adjust.  Simply put, an exclusive buyer agreement is a contract between a homebuyer and their Realtor that for a set period of time they will not buy any real estate of a specific category in a specific location without using the services of that realtor in buying the property. Also, it's typically an agreement to compensate the buyer's agent for their agency in the sale. It is possible to sign a non exclusive buyer's agent agreement, but many agents may not be interested in this.   The three basic parts of an exclusive buyer agreement are:  It's for a set period of time.  There's an agreement to compensate for helping finding real estate of a specific type in a specific location. There's an agreement not to work with another realtor in finding that specific real estate.  What are some things that buyers should look for when signing a buyer representation agreement? First, check to see if the time period of the agreement is appropriate. You want to make sure that your Realtor knows that you have agreed to work with them exclusively for a time period in order to get the best possible service, but if the time period is too long it may not make sense.  Second, what compensation is the agent looking for? Agreements will set the buyer's agent commission at a certain percentage of the sale price, a flat fee or maybe even an hourly rate.  Agents can also charge a non refundable engagement fee much like an attorney charges a retainer. Realize that just because you sign an agreement saying that you will pay a commission to a buyer's agent doesn't mean that you will pay that commission. The seller on the home you purchase may still offer a commission to your agent that is sufficient to cover your agreement. Also, the seller may not offer a commission at all or it may not be sufficient to cover your agreement so you need to be prepared to cover the amount that you have agreed to in the contract. Please keep in mind that all commissions are negotiable and that includes the agreement with the agent you choose to represent you and how the seller compensates your agent when making an offer on a home.  And third, the type of real estate or location specified in the contract is too broad and general. If you are looking in two very different locations you may want to have different agents who specialize in their respective areas. Make sure that your agreement specifies those specific locations. Another scenario could be that you are looking at a home for your family, but you are also looking for an investment property or a  commercial building for your business. Again you may want two different agents working on this, a residential for your family home and a commercial agent for your business. Your agreement should reflect the type of property that you and your Realtor will be looking for. 

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