Buyer Representation Agreement and what it means for buyers

If you are intending on buying real estate in today’s market, or have been working on buying, chances are its been challenging, to say the least.  In many areas and price points, you are likely still finding yourselves competing with other buyers as we are still seeing low inventory and very little choice for all the future home buyers out there. That part is, however, overcome-able (is that a word?) With the right guidance (ahem) behind you, you could find yourself writing one successful offer and skipping down the road to homeownership like many of my clients. 

When you want to sell your house, you will likely sign a listing agreement with your agent to engage their services.  It’s a contract that specifies the agent’s duties, what their fees are, and how long the contract is enforceable.   What is changing, and what you need to be prepared for, is the Buyer Broker Representation Agreement that will likely become a requirement to execute with your real estate agent prior to engaging in any real estate related activities.   In addition to outlining the duties of the real estate professional and the commitment between a buyer and their agent, that buyer will also commit to ensuring the agent is paid for their services at close of escrow. How this will exactly unfold has yet to be seen as the new rules are not slated to go into effect until July, however we are seeing more and more agents employ this practice with their clients.  Below are the two basic scenarios that could take place for you as a future homebuyer:

1. The seller agrees to pay commissions for both their agent (seller’s agent) and the buyer’s agent in the form of a “concession” or credit to the buyer.  Why would a seller agree to pay for the buyer’s agent commission if they don’t have to? Likely because they will see a diminished number of able buyers come through if these funds are not accounted for.  Not every buyer has the financial means to pull together not only their down payment, but also their closing costs AND a commission on top of that.  In this case, the commissions are still built in to the purchase price as they have been and are currently.

   
   

2. The seller does not offer any concession or commission credit to the buyer, which would require the buyer to pay their agent’s commission at close of escrow. If a buyer has the ability to do so, that opens up a lot of options to them.

For both scenarios, it will be an important part of the discussion with your buyer’s agent to discuss the amount of compensation they charge for their services. This will be written in to the contract, or Buyer Broker Representation Agreement.

Another important topic to discuss with your buyer’s agent is if you are interested in seeing/pursuing a home where the seller is not willing to provide commission concessions for your agent and you are not in a financial position to pay for the commission directly or wish not to do so. 

The big takeaway here is that although the written structure of how buyer representation works and how the buyer’s agent gets compensated is changing, the basics are not.  The commissions have always been built in to the price, the buyer has always paid for it through their purchase price if the seller was paying all commissions, and buyers and sellers have always had options and choices of how to pay commissions, who they want to work with, how much that agent may charge for their services, and how much they wanted to pay, as well as who they wanted to engage with for representation.

I am happy to walk you through this ever changing real estate landscape in an honest, transparent, professional manner with no gimmicks. Please feel free to reach out with any questions about this or other real estate related topics.  I can be reached at 619-944-2798 or Megan@Meganb.com