The real estate world is buzzing with changes, and you might have heard a few things that sound more like scary movie plots than the truth. Let’s clear the air with some straightforward talk about what’s really happening and how it affects you. As industry professionals, it’s our responsibility to provide clear, accurate information to our clients and the public. This Q&A is designed to help dispel myths and educate on the role of agents in facilitating the likely biggest financial and emotional transaction in people’s lives. Here’s a breakdown of how we got here and what to expect:
Q: What does the NAR settlement mean for the future of buying and selling homes?
A: The NAR settlement marks the beginning of a new era in real estate, characterized by enhanced choice, clarity, and transparency. This shift challenges us as real estate professionals to elevate our services and expertise, ensuring we continue to provide exceptional value to our clients. It’s an opportunity for us to showcase the depth of our commitment and the strength of our industry’s standards. As hard-working professionals who show up every day in service to our clients in exchange for making a fair living, we are here for it!!
Q: Do people actually feel pressured to use a real estate professional?
A: It’s important to note that consumers have always had the choice to buy or sell a home without the assistance of a real estate professional, and there are many tools available for those who prefer to go it alone on the buying or the selling side. Comparable to the choice between using TurboTax or hiring a CPA, or opting for RocketLawyer over a traditional attorney, the decision reflects one’s preference for guidance in what is often the most significant investment of their lives AND the roof over their heads. Statistics from a recent Keeping Current Matters poll highlight that 91% of people find the idea of navigating the home buying process without a real estate professional stressful. Furthermore, 87% view an agent or broker as an essential trusted advisor.
Q: How did the role of a Buyer’s agent come about?
A: Traditionally, real estate agents worked under a system where they were presumed to be representing the seller’s interests, which left buyers without explicit representation, making the transaction heavily skewed in favor of a home seller. The evolution towards recognizing buyer’s agents or buyer representation formally began to take shape in the late 1980s and early 1990s – a welcome change that offered homebuyers clearer representation and advocacy in negotiations and due diligence processes.
Q. When did the Seller start paying all of the commissions?
A: As part of a listing agreement, it has always been common for sellers to agree to what they will pay their agent. With the introduction of Buyer’s agents the practice of the listing agent sharing a portion of their commission otherwise known as cooperative compensation became more common where the seller agrees to a total commission with the listing agent, who would then offer a portion to the buyer’s agent as compensation to represent their clients in the purchase of the property.
Q. What’s the standard commission rate?
A: There is no set rate or percentage. Many of us work for different amounts on the buying and selling side depending on the situation. Our commissions have always been negotiable based on a rate that feels fair to everyone. Clients and their agents have the right to say “no” to a rate that feels unfair. As it stands today, there is a field for amount for compensation for the buyer’s agent, with the minimum amount being one dollar in our local MLS. Most sellers will still see the value in offering a buyer’s agent commission as most of them had their buyer’s agent fee covered when they purchased – a way of paying it forward and an effort to attract as many buyers as possible.
Q: What opportunities does this new era present for real estate agents?
A: This new era is ripe with opportunities for real estate agents to demonstrate our value in fresh, compelling ways. It encourages us to refine our skills, leverage new technologies, and enhance our client service strategies. By embracing the principles of choice, clarity, and transparency, we can strengthen our relationships with clients, build trust, and guide them through one of the most significant decisions of their lives with confidence and expertise.
Q. What if I can’t afford to pay a Buyer’s Agent?
A: Here’s where it gets interesting. The new setup changes how buyer’s agents get their share, moving it outside the MLS (that big database of home listings). But don’t worry, it’s not as complicated as it sounds. Basically, buyers and sellers can still work out who pays what; it just won’t be listed in the MLS. This could be through negotiating seller contributions or other creative solutions. The goal? Keep everything above board and flexible. Fun fact: This is the way it’s been done in the commercial real estate world all along.
Q: When will the use of a buyer representation agreement become mandatory?
A: Starting in mid-July 2024, MLS participants will be required to use buyer representation agreements as per the NAR settlement. This is like an employment agreement that a buyer and their agent sign outlining the duties and compensation that an agent will make if they do their job. This already happens on the selling side in the form of a listing agreement. Many agents have been using this for years as a way of protecting themselves from a whole lotta work for nothing, as there is only a requirement for $1 to the buyer’s agent in our local MLS.
Q. VA Buyers can’t pay for representation. What does that mean for them/us?
A. That’s the big scary one we have to work hard to advocate for as the VA hasn’t established any adjustments to their current guidelines yet. We remain hopeful that this will force change to allow for more access to homeownership to our beloved veteran clients, not less. We are tracking this closely and feel confident that by the time comes, solutions will be in place to help VA buyers land a home with favorable terms no matter the market.
Q: What do Realtors REALLY do?
A: If you’ve worked with anyone in the Collective, you’ve experienced the value of having a trusted professional advocate by your side every step of the way. If you would like a glimpse into what really goes on behind the scene to keep it easy-breezy for our valued clients, check out all the things we do as agents to help sellers get their home sold and help buyers land a home on their terms