Understanding the Changes Coming to Real Estate in August 2024
In March, the National Association of REALTORS® (NAR) reached a significant settlement that will introduce nationwide changes to how people buy and sell homes, starting in late summer 2024. To help you navigate these updates, I’ve put together an overview of the new regulations, along with a Q&A and some things to consider.
Overview
1. Agent Compensation Model
The agent compensation model is a central aspect of the new policies. Compensation amounts for real estate agents are negotiable and may include paying agents a percentage of the purchase price (as traditionally done), a flat fee or hourly rate. Notably, a buyer may be the party to compensate their buyer agent directly at closing, rather than the seller covering this cost.
2. Buyer Agreements
A key change is the requirement for buyers to have written agreements with their buyer agents. The intention behind this is to help buyers make informed decisions and provide more clarity and transparency in the buyer-agent relationship. Under the new rules, buyers will no longer be able to view a home without an exclusive contract in place with an agent.
3. MLS Information
In the past, the compensation offered to buyer agents by sellers was posted in MLS. This practice is being discontinued to prevent potential conflicts of interest, such as agents being tempted to steer their clients towards properties offering higher compensation.
Q&A
When do these changes go into effect?
August 17, 2024
Are these changes just impacting Boston or Massachusetts?
No, these changes are going into effect across every state in the U.S.
Do I really need to have a written agreement with a buyer agent before I can see a home?
Starting Aug. 17 – yes. In some states, such as Connecticut, buyer agreements have been in effect for many years, so it will be nothing new to some consumers. They haven’t been customary in Massachusetts, but they will be going forward.
What is in the agreement?
It is fairly basic – your name(s) and your agent’s name, the brokerage where your agent works, when the contract expires, what regions your home search will be in, and the compensation amount the buyer agent gets paid at the end of the transaction.
I only just met an agent and don’t want to commit yet. Do I still have to sign?
In a word, yes. However, you can make the agreement good for one day, one week, or as long as you would like until you are sure you want to work with that person.
Do I need an agreement to attend an open house?
No. You can attend open houses as you always have, but check back here for updates, as this could change.
I am a seller. Will I no longer be expected to pay the buyer agent’s commission?
A seller compensating the buyer agent is how it has been traditionally done, but it is optional. We anticipate many sellers will continue to offer buyer agent compensation for numerous reasons, including that buyer agents help to sell your house!
I am a buyer, and I may need to pay for my own agent? I thought these services were free?
Buyers have always indirectly paid for their agent through the sale price of a home, but may now need to pay their agent directly. However, the seller paying the compensation can be negotiated with your offer, just like other terms such as a home inspection or financing. Additionally, many sellers will likely continue offering compensation to buyer agents, so this may not be a significant concern.
If buyer agent compensation won’t be posted in MLS anymore, how will anyone know if the seller will be offering it?
This field will be eliminated from MLS, but the information is allowed to be communicated through other channels. Your buyer agent can discuss with the listing agent what the seller’s intentions are.
Are these changes going to save home sellers money?
Not necessarily. While a seller might consider asking the buyer to cover their agent's fees to reduce the seller's costs, this approach could backfire. It may result in the home staying on the market longer or necessitate a price reduction to attract buyers. Additionally, if buyers are responsible for paying their agent directly, they might lower their offer to account for this expense. Ultimately, any potential savings for the seller could be negated by these factors.
Can a buyer forego having a buyer agent?
Buyers can opt to do that, but it could lead to potential issues and costly mistakes. Keep in mind that the listing agent's fiduciary duty is to the seller, not the buyer. Without their own representation, buyers risk making poor decisions, losing money or incurring a lot of added stress. I have found that even experienced buyers need guidance through the process. You can do all of the things listed here – or let an experienced buyer agent manage it!
Can the list agent also represent me in addition to representing the seller?
This is known as Dual Agency, and it can be more problematic than the scenario described in the above paragraph. As a dual agent, the listing agent must remain neutral by law and cannot provide guidance to either the seller or the buyer. This means neither party would receive the expert advice they would typically expect. Additionally, everyone involved must agree to this arrangement; it cannot be a unilateral decision.
How much do agents get paid?
There is no standard amount, and we see a range throughout Massachusetts. You will discuss and agree to an amount with your agent when you complete the buyer agreement or listing contract. Note that agents are not paid anything until after the closing, even if the process takes months or years (which it often can).
Things To Remember and Consider
It is possible that these changes may evolve over time once they have been tested out in the real world. I will aim to update this post as new information and details are released, so check back every so often. We are all navigating the new real estate landscape together.
I am curious what you think about all of this and want you to reach out with questions and comments. Thanks for your time and please enjoy the last weeks of summer!
This page was updated on Aug. 26, 2024
Disclaimer: The information provided in this article is for educational purposes only and does not constitute legal or financial advice. Readers are encouraged to consult with a qualified professional for personalized guidance regarding their specific real estate needs and circumstances.
Overview
1. Agent Compensation Model
The agent compensation model is a central aspect of the new policies. Compensation amounts for real estate agents are negotiable and may include paying agents a percentage of the purchase price (as traditionally done), a flat fee or hourly rate. Notably, a buyer may be the party to compensate their buyer agent directly at closing, rather than the seller covering this cost.
2. Buyer Agreements
A key change is the requirement for buyers to have written agreements with their buyer agents. The intention behind this is to help buyers make informed decisions and provide more clarity and transparency in the buyer-agent relationship. Under the new rules, buyers will no longer be able to view a home without an exclusive contract in place with an agent.
3. MLS Information
In the past, the compensation offered to buyer agents by sellers was posted in MLS. This practice is being discontinued to prevent potential conflicts of interest, such as agents being tempted to steer their clients towards properties offering higher compensation.
Q&A
When do these changes go into effect?
August 17, 2024
Are these changes just impacting Boston or Massachusetts?
No, these changes are going into effect across every state in the U.S.
Do I really need to have a written agreement with a buyer agent before I can see a home?
Starting Aug. 17 – yes. In some states, such as Connecticut, buyer agreements have been in effect for many years, so it will be nothing new to some consumers. They haven’t been customary in Massachusetts, but they will be going forward.
What is in the agreement?
It is fairly basic – your name(s) and your agent’s name, the brokerage where your agent works, when the contract expires, what regions your home search will be in, and the compensation amount the buyer agent gets paid at the end of the transaction.
I only just met an agent and don’t want to commit yet. Do I still have to sign?
In a word, yes. However, you can make the agreement good for one day, one week, or as long as you would like until you are sure you want to work with that person.
Do I need an agreement to attend an open house?
No. You can attend open houses as you always have, but check back here for updates, as this could change.
I am a seller. Will I no longer be expected to pay the buyer agent’s commission?
A seller compensating the buyer agent is how it has been traditionally done, but it is optional. We anticipate many sellers will continue to offer buyer agent compensation for numerous reasons, including that buyer agents help to sell your house!
I am a buyer, and I may need to pay for my own agent? I thought these services were free?
Buyers have always indirectly paid for their agent through the sale price of a home, but may now need to pay their agent directly. However, the seller paying the compensation can be negotiated with your offer, just like other terms such as a home inspection or financing. Additionally, many sellers will likely continue offering compensation to buyer agents, so this may not be a significant concern.
If buyer agent compensation won’t be posted in MLS anymore, how will anyone know if the seller will be offering it?
This field will be eliminated from MLS, but the information is allowed to be communicated through other channels. Your buyer agent can discuss with the listing agent what the seller’s intentions are.
Are these changes going to save home sellers money?
Not necessarily. While a seller might consider asking the buyer to cover their agent's fees to reduce the seller's costs, this approach could backfire. It may result in the home staying on the market longer or necessitate a price reduction to attract buyers. Additionally, if buyers are responsible for paying their agent directly, they might lower their offer to account for this expense. Ultimately, any potential savings for the seller could be negated by these factors.
Can a buyer forego having a buyer agent?
Buyers can opt to do that, but it could lead to potential issues and costly mistakes. Keep in mind that the listing agent's fiduciary duty is to the seller, not the buyer. Without their own representation, buyers risk making poor decisions, losing money or incurring a lot of added stress. I have found that even experienced buyers need guidance through the process. You can do all of the things listed here – or let an experienced buyer agent manage it!
Can the list agent also represent me in addition to representing the seller?
This is known as Dual Agency, and it can be more problematic than the scenario described in the above paragraph. As a dual agent, the listing agent must remain neutral by law and cannot provide guidance to either the seller or the buyer. This means neither party would receive the expert advice they would typically expect. Additionally, everyone involved must agree to this arrangement; it cannot be a unilateral decision.
How much do agents get paid?
There is no standard amount, and we see a range throughout Massachusetts. You will discuss and agree to an amount with your agent when you complete the buyer agreement or listing contract. Note that agents are not paid anything until after the closing, even if the process takes months or years (which it often can).
Things To Remember and Consider
- The commission paid to an agent is always negotiable.
- Sellers can choose whether or not to offer buyer agent compensation but should discuss the pros and cons with their listing agent so they make informed decisions.
- Home buyers will need a written agreement with their agent before seeing a home, but these agreements can be for any length of time if the buyers do not want to commit to a lengthy contract.
- At the time of offer, buyers are free to negotiate that the seller pay the buyer agent's compensation. It is entirely possible that the home seller will agree.
- Home buyers should consider the value of having their own agent represent them in the transaction. It is recommended that buyers interview a couple of agents to see who they want to work with and who they feel will best protect their interests. Buyer agents work very hard on your behalf and help you navigate all aspects of the home-buying process.
It is possible that these changes may evolve over time once they have been tested out in the real world. I will aim to update this post as new information and details are released, so check back every so often. We are all navigating the new real estate landscape together.
I am curious what you think about all of this and want you to reach out with questions and comments. Thanks for your time and please enjoy the last weeks of summer!
This page was updated on Aug. 26, 2024
Disclaimer: The information provided in this article is for educational purposes only and does not constitute legal or financial advice. Readers are encouraged to consult with a qualified professional for personalized guidance regarding their specific real estate needs and circumstances.