This July everything changes. In accordance with the National Realtors Association settlement, no longer will listing agents be able to post offers of commission to buyer’s agents on the multiple listing service. Furthermore, all buyer’s agents must have a buyer/broker representation agreement with their buyers. The buyer representation agreement details the relationship between the buyer and broker and how much commission the buyer will pay the broker. If a seller is not offering to pay that full amount, or any amount, the buyer will need to come directly out of pocket for the previously agreed upon commission.
In Marin County currently most Realtors do not use a buyer representation agreement. In theory it’s always been a good idea to have one in place, but in practice very few agents have ever used one. That's likely because our culture is so laid back. In fact, I only know of one agent who uses them currently. The good news for agents is that once a buyer representation agreement is in place, the buyer will be contractually bound to work with that broker. It’s been a persistent issue in our industry, especially with newer agents, where buyers bounce around from agent to agent, causing many agents to work for free with buyers for an extended period of time (think weeks, months and in some cases even years), only to have the buyers turn around and purchase a home with another agent. It’s a brutal business.
There is bad news for a lot of buyers in this settlement, which ironically was brought on by buyers. Putting the buyer's agents commissions directly on the buyers will make the difficult job of coming up with closing costs even more challenging for cash strapped buyers, especially first time home buyers. Buyers will be able to negotiate how much commission they offer their agents, but whatever that number is, the money will come directly from the buyers, instead of indirectly through the sellers. And it's going to hurt.
In my 20 years of real estate sales experience, I’ve mainly worked with sellers. The real estate mantra is, list to last. Roughly 1 in 10 transactions I do are representing buyers. As a seller’s agent, I’ve always been able to post how much commission my sellers are offering buyer’s agents. Without calling ahead, buyer’s agents are not going to know how much commission sellers are offering. Buyers aren’t going to know how much more or less they will need to come out of pocket before looking at each and every property. The lack of transparency will be chaotic. The idea of this settlement is to encourage sellers not to offer buyer’s agents commission so buyers can determine the cost of their own representation. Eventually that’s where I see the industry heading.
Until we get to that point, which will not happen overnight, it will behoove seller to keep offering buyer’s agents commission. First and foremost, it will make it more affordable for buyers to purchase homes if they don’t have to come up with the commission in their closing costs. More buyers being able to purchase homes potentially translates into more interest and offers, which can drive up sales prices. Sellers offering buyer’s agents commission will make homes more attractive to buyers and their agents. It’s a win-win for everyone that we may see go away.