Editor’s note: Sharon Currie, our incredible operations manager who brings more than 20 years experience as a Realtor to the team, not only has a way with words but also the astute ability to explain real estate world jargon for all of us not-so experienced. If you’re wondering what changes come with the new Buyer Broker Representation Agreement the California Association of Realtors has implemented, look no further. Sharon gets us all up to speed in just a few minutes read. Thank you, Sharon!
Sharon Currie
A lot of people are asking me about the real estate upheaval. So I thought I would just write this small(ish) blurb to set the record straight.
The good news is not that much has changed, really. The bad news is, for agents anyway, there’s more paperwork. I am a contract geek so for me it’s a not a big deal.
To keep this short, I don’t need to go into why this all happened. You can read about that.
When you think about it, at the end of the day, the buyers agent compensation has always been paid by the buyer.
When you think about it, at the end of the day, the buyers agent compensation has always been paid by the buyer. It’s always been decided by the seller ahead of time via the listing agreement and packed into the purchase price. The seller, via escrow, uses the money the buyer gave them, and it matriculates down into the buyers agent compensation through escrow.
OK so now for the changes. We used to be able to see what a seller was willing to pay to a buyers agent on the MLS. That is now gone across the nation. Yes, we no longer know the intentions of the seller, yet the buyer is responsible for paying our fee. That doesn’t feel good when you’re a buyer who now has to go on faith.
The new paperwork says explicitly that the buyers agent compensation is the responsibility of the buyer and the buyer gets to decide what they are willing to pay. The agent and the buyer must agree on this amount. If a buyer wants to save some money and look for an agent who is willing to work for less, of course they can do that because commissions are 100% negotiable.
It’s like my favorite saying, “If you’ve got a $10 head buy a $10 helmet.” Choose your agent wisely and pay for a good one. If you don’t know how to do that, ask me.
There may be less experienced agents, less busy agents or discount brokers who are willing to do that and some of them may be very good agents. I’m not here to judge how agents do their business. However, I don’t expect any of the top agents that I associate with to reduce their fee because, through the experiences we’ve had over many years of selling a lot of properties of all different types, we bring a tremendous amount of value to the table.
It’s like my favorite saying, “If you’ve got a $10 head buy a $10 helmet.” Choose your agent wisely and pay for a good one. If you don’t know how to do that, ask me.
Sorry, I digressed; back to the new stuff. The buyers agent creates a purchase agreement paperwork trail that requests that the seller pay the buyer a “concession” so that the buyer can pay the agent. This “concession” is not the same as credits towards closing costs and does not reduce the amount of closing cost assistance you can have based on your loan product choice.
Some buyers may choose to pay this amount themselves without asking the seller for compensation, though that will probably be rare. Is it possible that the seller will say no? Highly unlikely if the agent is asking for a reasonable and customary fee, which right now rides at about 2 1/2%. The catch here is that the buyer is agreeing ahead of time to pay their agent, not knowing if the seller will agree.
Now, all this was created so that the buyers and sellers would have greater transparency and control, thereby somehow being more protected. This doesn’t sound like any level of protection to me, however so far we have had no sellers refusing to pay — and all of the agents that I am talking to remain flexible in their negotiations with their clients.
Buyers with an agent can no longer look at listed homes without a prior-inked financial arrangement with their agent; buyers may not go into open houses without filling out a specific form …
As time plays out, we will have a better idea if or how many sellers will be negotiating this fee down because it is 100% negotiable. An agent can choose to work for less money if a seller were to negotiate down, or the buyer can pay the remainder out of pocket.
There are a lot of other subtle nuances in this jumble, but that’s the basic idea.
Some other things to be aware of that are new: buyers with an agent can no longer look at listed homes without a prior inked financial arrangement (buyer broker agreement) with their agent; buyers may not go into open houses without filling out their information on a specific form before entering the home.
It is a misnomer that buyers must have representation. They may represent themselves in an effort to save 2.5%.
Whereas this might make you think of unrepresented people in a court of law, I believe the folly of that to be identical to representing yourself in a real estate deal. There are 1,000 moving parts that buyers are unaware of that we do to get a property from looking to purchase to closing. Reports that have to be understood, investigations that need to be made, awareness that needs to be brought to the forefront.
We can’t stop people from being unrepresented, and they can do it in this new real estate world. They do have to sign a form saying they are unrepresented. We expect this to be a very small percentage.
I hope reading this distills the new way of doing business into something a lot less terrifying than the media has made it out to be.
I hope reading this distills the new way of doing business into something a lot less terrifying than the media has made it out to be. Does this sound a lot like most of the time the seller is still paying the buyers agent commission? Yeah it sort of does.
I join you in wondering how this benefits anyone, but it is what it is and we soldier on, doing the best we can to make sure buyers buy the right property, at the best price with full knowledge of its pluses and minuses. There are no perfect properties, but there is the perfect property for you.
I’m teaching classes in this subject and am happy to discuss it further with anyone who has concerns or wants to dip deeper into the topic. Essentially, I’m not worried about it and you shouldn’t be either. It’s all going to be OK.
Sharon Currie, a Realtor with more than 20 years experience, is operations manager for the Betsy Hamilton Real Estate Team. Contact her via email at sharon@betsyhamilton.com for more information.