How the new rules impact both buyers & sellers
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You’ve probably heard the media reporting on significant changes in the U.S. real estate industry last year. These changes stemmed from lawsuits against major brokerage firms and the National Association of Realtors (NAR).
The court cases focused on a long-standing rule - Sellers must offer a commission to the buyer’s broker if they want their property listed in the Multiple Listing Service (MLS). The MLS has been the primary way listings reach buyers and sellers. For years, it worked well for both parties.
Today, with technology, it’s easy to stay updated on new listings, under contracts, and sold properties through an Internet Data Exchange (IDX) feed. An IDX feed connects real estate listing information from the MLS to the internet. This lets agents show MLS listings, including active, pending, and sold properties. It ensures the information is current and accurate. Moreover, this data syncs to third-party sites like Zillow, Realtor.com, or Homes.com within 15 minutes of any listing changes.
Today, most buyers research properties on broker* websites with IDX feeds, like my site (upper right corner button - SEARCH PROPERTIES), or through large national portals. As a result, today’s buyers are well-informed about the market and can identify suitable properties from online listings.
The NAR settlement, effective August 2024, eliminated the requirement for sellers to offer commission to the broker who brings the buyer. Now, every buyer must sign a buyer brokerage agreement with their agent (and brokerage firm) before receiving any real estate services. They also need to arrange payment to their buyer broker, in the event the seller does not offer compensation or offers less than the agreed amount.
Also, there should be no suggestion that there is a “set amount” that either a buyer or seller must pay. These amounts are completely negotiable between the agent and their client.
The first big change buyers will notice is that a signed buyer agreement is now required before a Realtor can show a property.
This is a significant shift from the current system, which traditionally placed the commission burden on sellers for valid reasons:
Lenders do not lend on a line-item called buyer-side commission. However, when sellers include their selling expenses in the listing price, lenders have been able to support lending on that price.
Some buyers struggle to pay buyer-side commissions after covering their down payment, mortgage fees, and closing costs. This can keep them from owning a home and reduce the buyer pool for listings.
When I work with buyers, I make sure they understand these new requirements and how we can tailor the approach to fit their needs.
You might think this is good news for sellers. Maybe...
Sellers benefit from broad property exposure! While some sellers may not want to offer compensation to a buyer's agent, this may limit their property’s reach to potential buyers.
More exposure can lead to competition for your property = higher sale price. Therefore, sellers aiming to sell in a competitive market should consider how best to support their listing agent.
Most sellers continue to offer buyer-side commissions to reduce stress, shorten time on the market, and attract buyers!
Here are some thoughts for buyers:
Last April 2024, I helped a family member search for a reliable used car. I quickly faced frustration and contacted a car broker recommended by a knowledgeable friend. After a brief call, I realized this service was worth paying for, as he would help me avoid buying “a lemon”.
This is what buyers want from their agent - to avoid making mistakes when buying a house.
Buyers want to feel confident that they know about flaws, potential issues and feel comfortable about the location. An experienced buyer broker guides clients through this process. That’s part of the value I offer - I’m with you every step of the way!
In this new landscape, buyer brokers must communicate their value to clients. Did you know a buyer broker can perform 90 tasks and negotiate at least 24 times during a transaction?
If you want to learn more about what a buyer broker does to help you find the right home and assist you in making informed decisions, reach out for this list.
Advice for sellers:
If you are planning on listing your property for sale, consider offering buy-side commission as part of your marketing costs. It will bring more buyers and can contribute to a successful closing.
No matter how well-maintained your property is, the inspection process can be nerve-wracking. Transactions can fall through at this step or the agreed-upon price may get renegotiated. However, this contingency is vital for a buyer’s due diligence and ultimately protects the seller from after closing issues.
While inspection can be an easy way out for buyers, it often hurts sellers financially when the property returns to the market. For sellers worried about buyers easily opting out during inspections, I have a proven system to weed out unreliable buyers, so your property doesn’t get stigmatized. Curious? Let’s talk!
If you're considering buying or selling in Walla Walla Valley, please reach out for a complimentary market analysis or to discuss how to sell your home this year.
Michele
*in WA State, licensed agents are called brokers. And they must work under a brokerage banner.
**NWMLS is WA State’s largest MLS with close to 30K brokers, however, they are not part of NAR.