The National Association of Realtors recently settled a class action lawsuit regarding how commissions are advertised. What does this mean for buyers? Very little. The manner in which buyer’s agent commissions are disclosed is changing. Not much else.
Buyers may be fearful, thinking that they now need to completely pay for buyers agents. They don’t. They do now need to sign a buyer broker agreement before a buyer’s agent will take them through houses. The agreement will usually specify a commission amount. If that amount is not paid by the seller, the difference will be made up by the buyer. But buyers agents will do their best to get paid by the seller. Even if a seller is offering minimal commission to a buyer’s broker, an offer can specify how much commission will be paid to the buyer’s agent. If the seller likes the offer, they will usually accept that they will pay the buyer’s broker’s commission.
The Spokane MLS, for example, no longer includes a field in the MLS listing form for entering a commission to a cooperating buyer’s agent. But a seller disclose how much commission they are offering pretty much anywhere else. Many emailed flyers are now disclosing commissions for buyer’s agents. Sellers agents can also disclose commissions on their own websites. Even if the disclosed commission is not enough to cover the buyer broker’s fees, the offer can state the commission agreed upon in the buyer broker agreement that was made with the buyer.
How much commission are sellers likely to offer to buyer brokers? This is another area where things change a bit. Buyer’s agents now must sign buyer agent representation agreements with buyers before touring houses. In those forms, they will agree on a commission with buyers. They will obviously try to get paid by seller’s agents but can agree that if the sellers don’t pay the full agreed amount, the buyer will make up the difference. If the seller offers more than what is in the buyer broker agreement, the buyer’s broker can only charge the amount that they have agreed to charge. So it may not make sense to offer a fixed amount. Instead, sellers can, and probably should, state that buyer broker commissions can be negotiated in an Offer. Buyer brokers will usually specify a commission in offers that correspond to the amount specified in their buyer broker agreements with their buyers. As different buyer brokers will have different commissions, some sellers will not specify a buyer broker commission and will instead negotiate this during the offer process.
It is possible that buyers will want to go unrepresented. Many don’t see the value of a buyer’s broker. No seller will want a buyer to go through their house without knowing if the buyer has been preapproved for a loan and has the downpayment saved up and the financial ability to complete a purchase. Unrepresented buyers will therefore want to go through open houses. It is possible for a seller’s agent to show a house to a buyer who is unrepresented while representing the seller and the seller’s best interests. Unrepresented buyers may not understand how to calculate number of days before an inspection period ends, how to negotiate for repairs during the inspection period, or how to property fill the complex offer forms and contingency forms. Sellers may be able to accept a lower offer from an unrepresented buyer if a buyer’s broker commission does not need to be paid. Sellers may prefer to deal with unrepresented buyers as they are more likely to make mistakes and to forfeit their earnest money if, for example, they don’t complete their inspection in the allocated time frame. In the past, open houses were mostly a way for seller’s agents to find potential new buyer clients. More serious buyers were usually already working with an agent and had specified to their agent what locations, prices, and features were of interest. Now, there is a potential value to sellers in having open houses.
In summary, the main differences to buyers is that they will need to negotiate a buyer broker agreement before going through houses, or will be limited to viewing homes that have open houses or for which seller’s agents are willing to let them in. Commissions to be paid to the buyer’s broker are negotiable. A buyer may need to avoid homes for which low commissions are offered to buyer’s brokers unless the buyer is able to make up the difference. However, it is possible to negotiate a commission matching the buyer broker’s commission during the offer process.