The Ultimate Guide to Understanding The NAR Commission Settlement in August 2024
Navigating the buying process in August 2024 involves understanding recent significant changes, particularly the impact of the National Association of Realtors NAR commission settlement and buyer representation. This landmark decision has reshaped real estate transactions, altering how commissions are structured and buyers engage with agents.
I’ve spent countless hours reading documents, watching videos, and using Zoom calls these last few months to understand the new changes. In summary, it’s a step up for the real estate industry. The new world of real estate begins this summer and change is good. The ease of new or inexperienced agents having a ready and able buyer may soon be a thing of the past. Sincere and savvy buyers who only want the best in class for representation will seek an experienced agent with specific expertise for their property purchase. It’s the same when sellers hire an experienced listing agent to list their property for sale, yet it’s now mandatory for buyers nationwide before previewing real estate.
New Dynamics to The Business Model
As you embark on your home-buying journey after August 17th this year, you must grasp these changes. This will help you to make informed decisions and successfully navigate the evolving real estate landscape. Buyer’s agents are trusted advisors who help you navigate the complexities of the real estate market, ensuring your best interests are always the priority. Finding and purchasing a home is a detailed process that demands efficiency, maximum time, and dedication to the end goal.
The Work of a Buyer’s Agent
My focus is to partner with you to fulfill your real estate goals. This starts with understanding your needs and what is important to you. Let’s confirm we are the right fit for each other. We will focus on your real estate goals and what we can do for each other to make sure this process runs as smoothly as possible.
Expert Searches: The first thing I will do for you is provide my expertise, experience, and service as a real estate professional. This expertise and experience will create a smooth and less stressful search and preview process. I will continue to search until we have located properties just right for you and then schedule meetings for property access. I cover both Miami-Dade and Broward County, having lived in both locations for two decades. This edge can open new neighborhoods and doors, whether SW Ranches or South Beach, Coral Gables, or Coral Ridge, you may not have previously considered.Experienced Negotiations: The second thing I will do for you is to use all the available technology to do a market analysis and find the back story on your prospective properties of interest. With all the information available, we can determine the market value and specific conditions for maximum leverage to negotiate the right price. Finding a home is only the first step; we will do it together. I’m sure you can agree that the right agent makes the biggest difference in the offer, negotiations, and overall experience.Transaction Orchestrator: The third thing I will do is help you coordinate and follow up with all the necessary entities, such as lenders, the title office, the attorney, the appraiser, inspectors, insurance, and the association, to bring us to a timely close while making sure the property is an ideal fit and sound investment. Daily nurturing and constant follow-ups are crucial to keeping the deal moving forward, and they are time-consuming.
This graphic illustrates the complexity and roadblocks to getting a property from contract to close and why buyer representation is critical with such a significant investment. While representing you, I will communicate and work with multiple parties so you don’t have to. If anyone doesn’t do what they’re supposed to throughout the process, you risk not closing on your property or encountering meaningful delays. This is where I come in — I am here to ensure we are proactive, everyone does their job, and your home goes from contract to close with very little hassle or headache.
I’m a Buyer Who Wants to Buy, Now What?
Right now, you do not have any representation. If you sign a buyer representation agreement with me as your agent, my contractual responsibility would be to protect your best interest.
Buying a house is one of the most significant purchases of your life. I tell my clients that I am the pilot of their home-buying experience. Like most flights, there will be some turbulence. Wouldn’t you want the best real estate professional representing you during that time of uncertainty?
Signing a buyer representation agreement doesn’t obligate you to purchase a home or condo. It’s just choosing me as your representative to help you find and negotiate the purchase of a property. With this commitment, I can dedicate time and energy to working with associations, inspectors, and everyone in between, so you don’t have to!
Buyer Representation Agreement
Committing to me as your partner in this home-buying experience is not you committing to purchasing a home. By signing a buyer representation agreement, I am committed to professionally representing you and providing the service, time, and attention it takes to find and close the home of your dreams. I am committed to protecting your best interest while minimizing conflicts, negotiating favorable terms, and ultimately providing the Superior Service to make you a client for Life. I’m asking for that same commitment for you to work with me.
I’ve been passionate about my work for over two decades because it leads to the ultimate reward—handing you the keys to your dream home. I’m happy to discuss the several types of buyer representation I offer so we can find the one that best works for you.
What If I Find the Property?
You will likely continue searching for homes online and find more driving around. As you do, I ask that you keep me in the loop. I will immediately look up the information to provide the finite details and back story you’re looking for. I’ll do the same, and if I learn anything new that may be coming soon that fits your criteria, I will keep you informed. I ensure you have proper representation throughout the process to protect your safety and best interests. If your situation changes, let me know as soon as possible so we can adjust our plan accordingly. Also, if you ever feel dissatisfied with my service, please let me know immediately so I can resolve any concerns.
FSBOs
If you see a for-sale-by-owner (FSBO), call me. I will request a showing and find relevant details to protect your time and potentially your safety by allowing me to assess the home and the credibility of the owner. Moreover, if the seller has no agent, it is even more critical that your agent help guide the transaction.
Open Houses
If you go to an open house without me, present my card or details to the seller’s agent so they know you are represented. You don’t want to deal with all the follow-up calls—I’ll protect you from the hassle.
New Developments
If you visit a new condo development or sales gallery, present my card so they know you are represented. When you sign a registration form, include the broker and agent information. The in-house agents represent the developer and cannot protect your interest like I can or negotiate on your behalf.
If you believe I’m giving you the best professional help and working in your best interest, we will work together until we find the right home.
Negotiation Prowess
Beyond the Initial Offer
Skilled negotiation is key to protecting your interests. I advise clients on inspection counteroffers, appraisal gaps, and repair requests based on the inspections, ensuring your investment is sound.
Protecting Client Interests
I help advocate for necessary repairs, negotiate favorable closing costs, and oppose unreasonable seller demands, ensuring the best possible outcome for my clients.
Saving Clients Money
Securing the best possible terms, even if just a few thousand dollars are saved on the price or closing costs, significantly impacts a buyer’s finances. The true value lies in these strategic savings.
Contract Expertise
Understanding the Contract
Contracts are packed with legal jargon, but I clearly outline my client’s rights, obligations, and potential risks, guiding you through the complexities.
Identifying Potential Pitfalls
My expertise allows me to identify clauses that could be a disadvantage to you. I ensure protective contingencies and negotiate clear deadlines and remedies for any issues.
Catching Errors
Small mistakes in paperwork can cause delays or costly disputes. My meticulous attention to detail ensures everything is completed accurately and on time.
Types of Buyer Representation
Exclusive buyer representation is my preferred method of representing you. With an exclusive commitment, I can dedicate substantial time and energy to helping you find and purchase a home. You become my highest priority. But understand that I am willing to be retained to represent you on a non-exclusive basis through a showing agreement. Either way, you retain me, but we must discuss how I will be paid for my services.
First, The brokerage and I are paid on a commission basis. That means I only get paid if I help you find a home you want to purchase and the transaction happens successfully. Unless and until that happens, no payment is due. Even though I may not be paid, I will do substantial work to make your home-buying process successful. That starts with looking at properties to find one right for you. As your agent, I will search listings and preview homes as needed, even if you aren’t here to help you find that perfect condo or home.
Beyond that, I will explain the home-buying process, help you develop your goals and expectations, arrange a pre-approval with a lender, and create a strong contract structure to negotiate the purchase price and ideal terms. I also coordinate the inspections, title insurance, association approval, and other closing services. I orchestrate and manage many other details needed to close the property efficiently and seamlessly.
Access and Advocacy
A Trusted Network
My strong relationships with lenders, inspectors, and other professionals streamline the process and uncover advantageous deals for my clients.
Off-Market Opportunities
I have access to properties before they hit the MLS, giving my clients an edge in competitive markets.
Tireless Representation
I am my client’s voice and champion. I respond promptly to questions, negotiate vigorously, and prioritize your needs at every step. My dedication gives clients a significant advantage in the buying process.
How Does the Buyer’s Broker Get Paid?
As your representative, I want to be transparent about how buyers’ agents are paid for our services. Both The brokerage and I are paid on a commission basis. That means I only get paid if I help you find a home you want to purchase and the transaction closes. Unless and until that happens, no payment is due. There are several ways in which I can be paid for my services, including:
The Seller of the property you are interested in has offered to pay the buyer’s broker a commission. This was disclosed in the MLS before August 17th, 2024 as part of the listing. Now, we must investigate each property.The seller has not offered to pay the buyer’s broker a commission, but we include that requirement in your offer on the property.You will be responsible for compensation if the seller does not agree to pay a buyer’s broker commission.
Please note that the payment amount is not legally set and is fully negotiable. The payment terms are in the buyer representation agreement you would sign when I am retained. As your broker, we can help you make informed decisions. For example, we will prepare a comparative market analysis to help you assess the market value of any particular property you are interested in. That market analysis will also help us negotiate the purchase price and terms most favorable to you.
Sample Forms for Showing Properties
Here are two sample forms that include exclusive buyer representation and a try-before-you-buy agreement, otherwise known as a simple showing agreement.
Implementing the Local Team
As your broker, we can recommend other professionals you may need for the home purchase, such as home inspectors, lenders, attorneys, insurance providers, movers, contractors, painters, and other local support. Having a dedicated professional advocate for you throughout the home-buying process is a worthwhile investment as you make one of the biggest purchases in life.
Local Market Expertise
In-Depth Neighborhood Knowledge
As an agent for over two decades, my deep understanding of the local landscape is invaluable. I know which streets are quiet, where new construction is happening, and which overlooked neighborhoods are on the rise. This insider knowledge helps my clients find their dream locations and avoid pitfalls.
School Zones and Community Resources
Familiarity with top-rated schools, parks, libraries, and other community resources is crucial for long-term satisfaction, especially for families. This information helps clients choose locations that best suit their family needs.
Future Development and Zoning Insights
We can anticipate upcoming changes in development and zoning that can significantly impact property values. By staying informed, I protect your investment and help make strategic decisions. I was involved with land sales in Wynwood in 2015, just as zoning changed and the neighborhood design began with a future residential vision. I met with zoning officials and informed clients of the upside investment opportunities.
Pricing Trends and Micro-Markets
Even within a single location, neighborhoods can have vastly different price points and market dynamics. My in-depth analysis ensures the clients offer strategically and get the most value for their budget.
Problem-Solving
Anticipating Roadblocks
My experience gives me great insight, allowing me to foresee potential issues with appraisals, inspections, financing, title searches, and more. I proactively suggest mitigation strategies to smooth the process without headaches or hassles.
Resourceful Solutions
When problems arise, I offer creative solutions based on tried-and-true experience. These can include finding alternative financing, negotiating repairs, or working with local authorities to resolve unexpected issues like expired permits.
Understanding the Buying Process in August 2024: NAR Commission Settlement Impact Q&A
Agreements are required after August 17th, 2024, and will be enforced through precedent-setting legal means before previewing any property Nationwide.
It is common but not required. Many sellers recognize the value of offering a commission to buyers’ brokers and include the commission in the MLS listing. Sellers know that buyers benefit from having their broker commission paid by the sellers out of the sale. Sellers also often see the value in having a buyer be represented because the transaction is likely to go more smoothly and close on time. You should understand that while the seller may be paying the commission, my duties as an agent run strictly to the buyer. The seller’s payment allows you to use your cash for a larger down payment or other purposes because most buyers cannot finance the brokerage commission as part of their mortgage.
In that event, and because we have signed a buyer’s representation agreement, there are a few options: You can make the purchase offer subject to the seller agreeing to pay the buyer’s broker commission. Secondly, you can negotiate a hybrid where the seller may pay part of the broker’s commission, with you paying the balance. Third, and lastly, you, as the buyer, could pay the full commission.
As the buyer hiring a broker for beneficial and specific representation, you and your agent may need to find additional properties that could sell for a different price point to pay the buyer agent fee. You can also select only the properties where the seller agrees to pay the buyer’s agent a fee. You can also have the representative negotiate the broker’s compensation directly with the seller in their offer, essentially asking the seller to pay for the compensation as part of the transaction. You should discuss all possibilities first with your agent and let them help direct you in their searches to find the properties that match your needs and budget.
Maybe, however this is just like a buyer calling the name that is on the listing for the property for sale. Buyers have always had that choice. A buyer representative looks after your best interests and not the seller’s. Dual agency is still up for discussion with this new standard of practice.
Effective August 17th, commission compensation information is no longer available within the MLS. In addition, as a member of NAR, we must sign a buyer-broker agreement to disclose how we are being compensated. This is a new rule change going into effect from NAR in August 2024 based on the pending settlement.
We will market and promote buyer compensation information on social media, company websites, and similar (non-MLS) forms and media.
When signing a buyer broker agreement, this will indicate various ways of compensation. The purpose of the written agreement is to specify agent compensation and disclose how the buyer’s agent is getting paid and their role in the transaction. The buyer’s agent will be paid directly by the buyer or the seller if they decide to do so. In most cases, we aim for the seller to pay, although speak to your CPA as it may benefit you by paying.
Sellers can continue to offer buyer broker compensation if they choose and in the amount they choose, or they can choose not to offer any compensation to the buyer broker, in which case the buyer would be responsible for the payment.
The MLS service will no longer contain compensation information of any kind. Buyers and buyer agents must sign an agreement and disclose how the agent and broker will be paid.
We are pending clarification from NAR regarding open houses and what qualifies as touring a property as defined in the settlement. It will most likely be a simple showing agreement for that particular property.
We await NAR’s clarification on the outcome if the buyer refuses to sign a buyer-broker agreement for the settlement agreement and 2024 rule change.
No, the representation agreement document covers all properties found by anyone, including the buyer, broker, or others that the buyer purchases.
The practice changes require the agreement to specify and disclose the “amount or rate of compensation,” in which compensation must be “objectively ascertainable and may not be open-ended.” in short, you cannot have range pricing anymore.
As a buyer or buyer’s agent, you can decide if you no longer wish to work with the broker or client. Review the cancellation paragraph of the agreement.
A simple showing agreement is used for one or a few related properties but names the specific property addresses. This is not a blanket agreement for all properties. A buyer-broker representation agreement is an exclusive agreement that covers all properties found by anyone during the term of the agreement. The broker has the exclusive right to sell any property to the buyer. This covers all properties as opposed to a showing agreement. A listing agreement is used with the seller to list a property for sale.
The date this new law begins is August 17th, 2024.
Visit RealEstateCommissionFacts.com for more information.
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