New rules buying and selling Real Estate explained

On August 17th 2024, after recent lawsuits against the National Association of Realtors and many national franchises, the rules for buying and selling Real Estate changed dramatically.  As with many things, you’ll find in many cases, we’ll end up right back where we started.  We’ll simply take a different path getting there.  I have always preferred contracts to be between a buyer and seller.  As a Real Estate Broker, I’ve always believed that Agents shouldn’t be a party to the contracts, let alone a piece of the negotiations.  Agents and Brokers are to put their clients intrests first.  With this new ruling, both Agents/Brokers have a intrest in the negotaition.

The New rules:

Buyer agreements, an exclusive representation agreement, will be required for an Agent or Broker to show any house.  Even their own listings.  Not having an agreement in place triggers significant fines.  This is a nationwide policy, not limited to Baldwin County.  In these contractual agreements, buyers and their Agent or Broker agree upon compensation to be paid at closing.  In the Baldwin Realtor contracts The buyer Agent or Broker, is instructed first to seek payment for representation from the transaction via a section in the purchase agreements.  If the seller does not agree to buyers Agent/Broker compensation, per the Agent/Broker agreement contract, the buyer will be required to pay the buyer Agent/Broker fee at closing.  This in itself can be problematic.  Especially for first time home buyers who many times are coming up with their downpayment and might lack funds to compensate their Agent or Broker.  Fortunately most transactions, Sellers are anticipated to agree to buyers Agent/Broker compensation from the transaction.

Listing a house, the seller will no longer be required to offer buyer agent compensation as has been the custom for many years.  This compensation was typically listed on the MLS.  Buyers agents knew up front what the cooperative compensation would be so the only thing to negotiate was the actual purchase between buyer and seller.  Under the new changes, the Seller and the listing Agent or Broker agree upon only the listing commission.  When sellers get an offer, it will likely contain a request for buyer Agent/Broker fee compensation from the transaction.  The seller will then have the option to agree to the compensation in the transaction or negotiate it as an element of the contract.  It can be even be rejected.  In full or partial.  Buyers will then consider their situation to determine if they can afford to pay their Agent/Broker’s fee, full or partial in addition to their down payement.  This can have a material impact on the negotiation and the viability of the contract.

Buying a house, the buyer, armed with a buyers agreement, will tour houses as usual.  When its time to put an offer on a property, a buyer using Baldwin Realtor contracts, will have the opportunity to add their buyers Agent/Broker fee compensation to the negotiation.  Let the negotiation begin.  If the seller flatly rejects or agrees to only a portion of the buyers representation, the buyer will have an option during negotiation to examine their financial situation and determine if this is the property for them.

So, one might say.  If I go directly to the listing Agent, I’ll get a better deal.  The buyer will still be required to sign a buyers agreement, outlining compensation, with the listing agent.  In many cases, in this scenario, as a buyer you would run into whats called Dual Agency.  Dual Agency occurs when one Agent or Broker represents both seller and buyer.  An agreement will be signed by all parties outlining duties and limitations of respresentation for each party.  Keep in mind, a buyers agreement, outlining buyer Agent/Broker compensation, is still required before the listing Agent can show the property to avoid significant fines.

So now, as I stated in my opening paragraph, we end up right back where we started.  Sellers will negotiate the listing commission, and in many cases, the buyer Agent or Broker will be compensated from the transaction as well.  We just took a scenic route to the same place.

The surest way to navigate these ever changing waters, is having a reputable Real Estate Broker assist you through the process.  I would like to be that trusted source.

Carl Gustafson – Real Estate Broker

251-533-8028

carl@thegustafsonproperties.com