If you follow the news, you have probably heard about the proposed settlement from the NAR regarding seller commissions. Part of this proposed settlement will also change how business is done between buyers and their agents. Read the linked article above for more info about all the different aspects of the settlement! In this post, I will talk more in depth about how to navigate just one aspect of this change: the new rule that buyer's agents MUST have a signed buyer broker agreement in order to show a buyer a property.
A Buyer-Broker Exclusive Employment Agreement is a contract between a buyer and a real estate brokerage that promises they will both work together in order for the buyer to complete a real estate transaction. The agent and their brokerage will owe this buyer a fiduciary duty to act in their best interest (among other things) and the buyer in return will owe the brokerage some kind of compensation. This can be anything from a flat fee, an hourly rate, or a percentage of the purchase price. Until this coming July, typically the buyer broker's fee is always paid by the listing broker through the settlement process at closing. This means that for the most part, buyers did not have to come out of pocket in order for their Realtor to get paid. People see pros and cons of this system, and in the future, I can write about how we got here and how buyer agency came about out of necessity for buyers to have fair representation in these huge and complex transactions. However, I think this system worked great for both buyers and sellers. It incentivized buyer's agents to show the seller's homes while also allowing buyers to afford representation without having to come up with even more money than they already have to at the closing table.
Starting in July, agents will need to have this agreement signed by a buyer before showing them even one house. While this has always been an ideal standard of practice, there are plenty of times when agents let it slide for a while. There are many times I have received a showing request from my website or a sign call, etc. and just gone to meet that buyer without having them first sign an employment agreement. Going forward, buyers will need to put a lot more thought into asking to see just one home. Here are some tips on how to find, interview, and choose a great buyer's agent!
Ask friends and family for referrals! The internet is a great place to find lots and lots of agents, but a personal referral is really ideal! You can get all the details about what it's like to work with this person from someone you really know and trust. So ask around to people you know: your family, friends, co workers, etc. Someone is bound to know someone great!
Interview your agent before heading out to look at homes. It's going to be more important than ever to make sure you feel confident with your agent before looking at homes. If you go straight to looking at homes and realize you just aren't a fit, it will be too late and you will have already signed an agreement with someone you don't love. So meet at their office, at a Starbucks, or somewhere else neutral. Ask lots of questions about their experience and what value they will bring to you. Don't be afraid to interview multiple agents, it is really important to do this work up front so that you feel confident with your choice!
Before signing anything with an agent, read reviews from previous clients! Even more, if they recommended a lender to you, ask the lender what it's like to work with that agent. By this time, hopefully you will have a personal referral, an in person interview, and online reviews to back it all up. Hopefully you have found someone you know will do a great job for you! Let your agent know you are ready to move forward with signing an agreement and make sure you understand all the terms of the agreement. In the future, sellers can absolutely still offer to pay the buyer's agent's commissions, but they may not. In those cases, you could be on the hook to pay your agent so you want to be sure to understand what you're getting into.
There are certainly thousands of reasons to hire a buyer's agent to represent you! After all, purchasing a home is most likely the largest investment you'll make in your life! Hopefully after reading this, you will have the tools to hire someone you feel confident will guide you through the process with your best interests in mind! Good luck!