What Buyers Need to Know
If you're planning to buy real estate in Santa Barbara, or anywhere really, and have been following the news about the recent NAR settlement, you might be wondering how to navigate purchasing a home and being responsible for your realtor's commission. This post aims to provide insights and key questions to ask your realtor during your buyer consultation, helping you understand how transactions will work in this new environment.
Understanding the Changes
In the post-NAR settlement world, buyers will need to sign a buyer broker agreement, which stipulates that the buyer is responsible for paying the realtor's commission. Previously, realtors could assure buyers that they would be compensated by the seller through the MLS. However, starting in August, MLS will no longer list buyer agency compensation, meaning there's no guarantee that a realtor will be compensated this way.
This change is significant. As a buyer, you now need to understand how this affects you and what steps you should take to ensure a smooth transaction.
Key Questions to Ask Your Realtor
When sitting down with your realtor for a buyer consultation, consider asking the following questions to gain clarity on the new process:
- How will the buyer broker agreement affect my transaction?
- Signing a buyer representation agreement will now be step 1 in the process, similarly to a listing contract.
- There are many ways you can establish agency so it's important to understand what type of representation you are signing up for.
- The default responsibility for a buyer’s agent commission will now be on you- the buyer. Prior to seeing any houses, you will need to negotiate a compensation amount for your realtor.
- Can I tour properties without signing an agreement?
- In the new environment, touring properties without a signed agreement addressing agency and compensation is not allowed. Ensure you’re clear on the terms of your contract before viewing homes with an agent.
- Can the seller still pay the commission?
- While sellers can still pay a commission, it's not guaranteed. Your realtor can negotiate this into the offer, but it's crucial to understand the implications.
- What are my options if I can't afford the commission?
- It is important to discuss your agent’s ability in different scenarios where you may not have the funds to cover the commission. Your realtor can offer strategies, such as negotiating the commission into the purchase price or asking the seller for concessions.
- What happens if the seller doesn’t agree to pay the commission?
- You can offer less of the purchase price if there is no competition on the home.
- You can pay your realtor directly.
- You can explore other homes.
- How will multiple offer situations be handled?
- In competitive markets, it's essential to know how your offer stands up against others, especially if commission negotiations come into play.
Navigating Commission Negotiations
Your realtor can structure offers in several ways to address commission payments:
- Include the commission in the offer price.
- For example, if the home is listed at $2 million, you might offer $2,060,000 million, asking for a $60,000 concession to cover the commission.
- Adjust the offer price to reflect the commission.
- Offer $1,940,000 million instead of $2 million, acknowledging your responsibility for the commission.
- Request a seller concession upfront.
- Clearly state in your initial offer that you're requesting a concession to cover the commission, making it part of the negotiation from the start.
The Impact on Buyer-Agent Relationships
This new settlement could lead to downward pressure on buyer agent commissions, potentially affecting the level of service provided. As a buyer, it's crucial to:
- Interview multiple agents. Understand their processes, systems, and how they plan to represent you.
- Discuss compensation upfront. Be transparent about your financial situation and negotiate terms that work for both parties.
- Seek experienced agents. Ensure your agent has the expertise, network, and negotiation skills needed to represent you effectively.
Conclusion
The NAR settlement introduces significant changes to how real estate transactions are handled, particularly concerning buyer agent commissions. By understanding these changes and asking the right questions, you can navigate this new environment more effectively. Remember, finding a competent and experienced agent who can negotiate on your behalf is more important than ever. Be proactive, ask detailed questions, and ensure you have a clear understanding of your obligations and the transaction process.
In this evolving real estate landscape, staying informed and prepared will help you make the best decisions for your home purchase.
