New Representation Laws

In the past, most sellers who listed property with a brokerage, paid both the listing agent and buyer agent commission. However, commissions have never been set by the real estate industry, and have always been negotiable. While many brokerages had a 'preferred' commission structure, sometimes the seller offered less, and occasionally, they offered more. This practice has taken place for so long the seller-paid commission has been baked into the sales price of the home.

 

Seller dissatisfaction with this practice came to a head recently with lawsuits against the National Association of Realtors and individual brokerages. The complaint was there was a lack of transparency in communicating how commissions worked. That is, many sellers and buyers were unaware commissions were negotiable. The result was an industry-wide change on how representation and the communication of commissions are handled.

 

It is now law that all agents showing homes must have a signed buyer rep agreement prior to showing. There are two separate forms for the Buyer Rep Agreement:

 

1. Short form - 'limited service' - agent only schedules showing and opens door to property. Agent will not represent buyer in the transaction, and may not share any information regarding the property, including neighborhood info, comps, commission, or any other info. The agent will not write offers. Brokerage may be paid for this service. The fee is negotiable.
2. Long form- 'full service' - constitutes a 'fiduciary relationship. Buyer authorizes agent to represent buyer in the real estate transaction, including, but not limited to: property and neighborhood research, schedule and show homes, provide and explain comps, research history of home, complete all paperwork, negotiate price and other contract items, attend inspection, negotiate repairs and allowances, follow-up on all items dealing with transaction, work with lender to ensure best case for buyer, partner with title to ensure all contract items and dates are met, correspond with the HOA, help coordinate move-in, consult/advise buyer during the entire process, provide closing cost estimate, review final closing docs, and attend closing. Always strive for best case scenario for buyer; trouble shoot issues, problem solve. Buyer agent will receive compensation. The fee is negotiable.

1. pay no buyer agent compensation
2. pay a portion of what the buyer agent requires; the buyer may pay the difference
3. pay exactly what the buyer agent has specified as their required compensation
4. pay a compensation based on offer price, i.e., negotiate compensation

Buyer may decide to pursue only properties where the seller is paying buyer agent compensation. If this is the case, the buyer agent (full service) will research the seller's offer. (Buyer agent compensation is no longer posted on MLS.) This compensation (or lack of) may be negotiable based on the offer price, and other negotiable items in the contract.