Have you heard? It has been a pretty consistent news topic in the National media for months now. So what have you heard? You might know a little bit or maybe even nothing at all. Either way, you may be confused about how this affects you. I’m here to give you a little bit of an explanation on how these new rules might affect you when you are ready to buy a home.
First of all – these are National changes and all the states have their own rules, as well. We now have some final decisions made by the State of Tennessee on how these changes will affect our forms/contracts, as well as our conversations and practices in listing and showing homes. I want to be fully transparent to ensure we all follow all the rules. If you are not working with me, your agent should be explaining all of this to you.
1. There will be a Buyer Representation Agreement we must sign BEFORE I am allowed to show you a home and we must discuss my compensation as your buyer agent before showing a home. This includes live video tours. The agreement outlines my obligations to you and yours to me, as well as outlining what an “agency relationship” is. It also explains my compensation which is always negotiable and not set by law.
2. The length of the Agreement is negotiable – it can be for one house, one day, one week, 1 month, 6 months, etc. I hope you decide you WANT to work with me which we both should be able to do after seeing a few homes. If we are both comfortable, at that point, I would ask for a longer agreement. If it’s not working, you are free to go work with another agent. If any agreement we sign expires before you find THE home, we must create a new agreement before viewing additional homes. To work together, we have to have a signed and active Buyer Representation Agreement.
3. The Agreement also explains my compensation for representing you as your agent. In many cases, the seller agrees in their listing contract to pay both the listing agent and the buyer’s agent. Or they agree to pay a certain amount in seller concessions and these concessions could include buyer agent compensation. In many cases, the seller does not want to pay the buyer’s agent compensation. However, we can ask the seller to pay my compensation by making it a part of your offer on a home. If the seller does not agree to compensate me as the buyer’s agent, and you want to move forward with the purchase of the home, you will be responsible for compensating me based on the terms of our Buyer Representation Agreement.
4. Previously the compensation offered by a seller was disclosed on the listing in the MLS. This is no longer allowed. So agents will have to call the listing agent to find out if compensation to the buyer agent is offered or buyers will have to ask for their buyer agent’s compensation in their offer for the home. Or you can choose to pay your buyer agent the compensation as outlined in your Agreement at closing.
Need an example? Let’s say you and I signed an Agreement in which we agreed my compensation would be 3% of the purchase price of the home. We find the perfect home for you. We make an offer asking the seller to pay your buyer agent compensation of 3%. The seller counter-offers 2%, you agree and you would pay me the difference of 1% at closing. (Seller 2% + Buyer 1% = 3% as agreed upon).
Or you can counter-offer with 3% and also offer a higher price for the home to ensure the seller nets their desired amount on the sale of the home. There are also additional strategies that can be used. This will all be part of the negotiation process, just like closing costs and repairs. Or you can take it out of the offer negotiation process and choose to pay me at closing without involving the seller at all.
As always, I am all about transparency and education. I am happy to go into further detail with you and will answer all your questions. It is important to me that you understand how this might be different from what you have done in the past. And some of these discussions might be uncomfortable. Either way, the discussions are important and need to happen. You may not like to talk about contracts and money but it will be necessary.
So what if you decide, “I’m not signing anything just to see a house!”? Well, then you can’t see that house with me as an agent representing you. Like I said, we can make the Agreement for one house or one day. You may decide to try to buy a home unrepresented by an agent. I strongly recommend against it and, in fact, that is my post for next week, so I’m not going to go into it on this already lengthy post. Come back next Tuesday.
Give me your comments and questions!
Tere Sells Homes 