By: Sara Pakula, Broker Owner of Modern Realty LLC 8/8/24
(Disclaimer: This blog is opinion based. Nothing written below should be construed as legal advice.)
We are now about a week away from mandatory industry-wide changes for real estate!
What changes should Buyers expect?
These changes may have a significant impact on buyers and their ability to purchase homes.
1. So you want to call up a random agent and see a house? There’s a form for that! In an effort to clarify customer and client relationships to better protect consumers, you will need one of three things completed PRIOR to stepping foot in a home:
a. Buyer agency agreement – allows you to hire an agent/broker to represent you in your home search and offer process. You are their client.
b. Notice to Customer – if you do not want to hire an agent, you are considered a customer. The showing agent is a sub-agent of the seller. If the agent drafts an offer on a house you see as a customer, they will not put your interests ahead of the seller’s by providing guidance on price and other offer terms.
c. Pre-agency agreement (NEW) – this is a new requirement post DOJ settlement. If a consumer has not opted to be a client and is unsure about being a customer, this agreement must be reviewed and signed by the buyer PRIOR to seeing a home. It is not a contract.
Please understand that an agent who allows you to see a home without using one of the above is creating a great liability for himself. This is a new legal requirement.
2. You may need more cash to close. Agents showing homes to you used to be able to see offers of compensation in the MLS listing information. Now, posting an offer of compensation in MLS, directly or indirectly, will be illegal and subject to significant fines if still attempted. Agents will need to contact listing firms for each property to see what compensation is being offered. This will be important for you when drafting an offer, unless you have funds available to pay your agent in full, if necessary.
3. Financing issues. When a buyer asks the seller for concessions at closing, there is a cap on how much that can be. Depending on down payment, loan type, and property type, it’s typically 2-6% of the purchase price. Thankfully, funds from the seller used to pay a buyer’s firm are excluded from these financing concession limits. There are currently some issues being worked out with VA loan programs as this has had a concerning impact on these transactions.
My recommendations to buyers:
· Be prepared to decide sooner if you want to be a client or customer.
· Pay attention to the commission listed in your buyer agency agreement. There’s been a tendency to gloss over this as the buyer probably wasn’t going to pay for this anyways. This is not the case any longer. Negotiate this.
· At the risk of being redundant, be prepared to pay your own agent’s commission in full at closing if the seller of your dreamhouse is not offering to help with this – worst case scenario.
· Smaller, local real estate brokers often have more flexibility in negotiating commissions, and you may even try to amend your buyer agency agreement while negotiating an offer on a home.
What changes should Modern Realty’s clients expect?
1. Showings – buyers may utilize the Pre-agency Showing Agreement during their first interaction with a Modern Realty showing agent, but will be required to move forward as a client or customer prior to any further showings. Modern Realty reserves the right to change this policy as needed.
2. Update Buyer Agent Commissions - In keeping with Modern Realty’s philosophy on commissions, and in light of challenging economic conditions, Modern Realty will offer buyers flat rate options. Modern Realty reserves the right to change commission rates at any time.
If you have questions or comments, please feel free to reach out to me at SPakula@modernrealtywi.com
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