The real estate industry is experiencing significant changes, especially in how agent compensation is handled. One major update is that buyers must now sign a separate representation agreement with their real estate agent *before* viewing properties. Additionally, sellers can no longer offer compensation to the buyer’s agent through the MLS. Each party—buyer and seller—must now have their own separate agreement with their respective agents.
These changes are designed to promote transparency and ensure that all parties in a real estate transaction have clearly defined roles and responsibilities. Our goal is to keep you informed and explain how these updates may affect your buying experience.
1. How Commission Payments Work Now
In the past, the buyer’s agent’s commission was typically covered indirectly as part of the purchase price, with the funds being deducted from the seller's proceeds. Under the new system, however, the commission for the buyer's agent will be negotiated directly between the buyer and their agent.
2. Buyer Representation Agreement
As mentioned, all real estate agents are now required to enter into a formal written agreement with buyers before any property tours take place. This agreement outlines the terms of the agent’s compensation, including the specific amount or percentage to be paid by the buyer at closing. This process is similar to the one sellers go through when they sign a listing agreement with their agent to define the compensation terms.
3. Possible Effects on Your Transaction
Buyers may have different options when it comes to handling agent commissions. Some may opt to include the commission in the overall purchase price, which allows it to be factored into the mortgage. Others might prefer to pay the commission as a separate closing cost. In some cases, there may be potential tax benefits to paying the fees directly, but a qualified tax advisor can best assist with this.
4. What Happens Next
We will send you a Buyer Representation and Broker Compensation Agreement for your review. During this process, we will explain all of the agreement's terms and address any questions or concerns you may have about these new industry practices. It’s important to fully understand your options before signing. Rest assured, we’ve been thoroughly trained on these new rules and are ready to provide guidance every step of the way.
5. A Push for Greater Transparency
The updated compensation structure is part of the industry’s effort to ensure financial transparency in real estate transactions.
Let us know if you have any questions—we’re here to help!