Okay, one major change since the NAR Settlement has to do with buyer agency agreements and many people are wondering: What are buyer agency agreements? Why do I have to sign them? And what do they mean for me?
As of August 17th, you must sign a buyer agency contract to visit a property you’re considering buying with a buyer’s agent. (Note: You do not need to sign a contract to visit a property with a listing agent directly, but always remember that the listing agent is representing the seller, not you as a buyer. Put simply, they are tasked with achieving the best interests of the seller!). These agreements aren’t exactly new. There were always buyer agency agreements in the past, they were just very rarely signed.
What am I signing?
The buyer agency agreement can come in many forms. Both the Massachusetts Association of Realtors (MAR) and the Greater Boston Real Estate Board (GBREB) produce templated versions of the “Exclusive Buyer Agency Agreement.” These contracts are approved by the relevant industry groups (and their attorneys) for everyday use between Brokers and consumers (buyers). Additionally, individual brokerage companies will produce their own contract forms to use for their clients that may vary slightly from the industry issued forms. In any event, each of these contracts will stipulate a number of now required items just in slightly different form:.
First and foremost, the duration that you are intending to work with that buyer’s agent. This could be as short as one property or as long as 100 years. It doesn’t matter. It just matters that you and your buyer’s agent agree on that duration. Naturally, the contract can be extended if you’d like to continue together.
Secondarily, it will stipulate how much that buyer’s agent will be paid if and when you purchase a property. So, whatever fee you negotiate with your individual buyer’s agent, you MIGHT be responsible for paying directly out of your pocket. This being said, we believe that in the vast majority of cases sellers will continue to pay all brokerage fees.
How could this look in practice?
So let’s say a buyer agrees with their buyer’s agent to sign a 90 day contract. In this contract, they agree that they will backstop their agent up to 2.5% of the purchase price. Then, towards the end of the contracted period, this buyer decides to make an offer on a specific property and submits that offer to purchase. But now, the seller or listing agent is only offering buyer’s agent compensation up to 2% of the purchase price.
The buyer’s agent should write into the offer that they are seeking a 2.5% commission on the gross purchase price of the home. Assuming the buyer and seller come to terms on everything, this would leave the buyer with no additional fee expenses. However, if the seller will accept the deal terms, including purchase price, closing date, etc. but only pay the buyer’s agent 2%, the buyer is, in theory, obligated to pay their agent 0.5% at the time of closing to true up the value that was agreed to at the beginning of their Buyer Agency contract.
Okay, can I only look at properties that pay my buyers agent?
Sure, you can always look at whatever criteria you want, although this may now be tricker to do.
This is a nuanced point to come out of the settlement. Buyer’s agent compensation can no longer be published through the MLS. Notably, this is specifically through MLS’s that are owned by the National Association of Realtors. As it so happens, locally in Greater Boston, our MLSPin is not controlled by the NAR. So, technically, local agents here can still publish and advertise fees on our MLS.
At Columbus & Over Group we are coaching agents internally about these changes, so that they can best represent their clients out in the market. These changes are very hard hitting for an industry that is not accustomed to big changes. Many agents, and even many owners of brokerage firms, are confused, if not outright baffled by how to handle their business in this new world. At the end of the day, what changes are sticky and meaningful over the longer term will be determined by market conditions. We’re well adjusted to changes in market conditions and we are ready to help buyers and sellers of real estate as they confront this new market in late 2024.
Reach out to me directly with any questions you may have about what is going on.
