The National Association of Realtors (NAR) announced changes to their practices and procedures as a result of the real estate lawsuit settlement. These changes take effect August 17, 2024. Major changes include (1) sellers will not be allowed to disclose offers of compensation to buyer agents on the multiple listing service (MLS) and (2) buyers will be required to enter into a written agreement with MLS participants before touring a property. This means that if you’re buying a home, you must be prepared to pay for your real estate agent. According to a NAR report, 89% of buyers chose to use a real estate agent. Here’s why.
BUYER AGENTS HAVE ALWAYS BEEN PAID
Some people are of the misconception that real estate agents representing buyers (buyer agents) work FOR FREE. The truth is that buyers agents have always been paid and will continue to be paid. In the past, many home sellers offered to pay for a buyer’s real estate agent. Additionally, this offer of compensation was an incentive to help home buyers with the costs of buying a home. So buyer agents never worked for free. With these new NAR policy changes, home buyers will now be required to enter into some kind of agreement with their real estate agent BEFORE touring a property. In Virginia, this was always the case though some agents chose to not put this into practice.
RISK MANAGEMENT THROUGH REPRESENTATION
The most compelling argument for paying for a buyer agent is REPRESENTATION. In Virginia, home buyers sign an agreement with a Broker. A Broker is licensed to manage their own firm and represents themselves and all real estate agents in that firm. In the “Exclusive Right to Represent a Buyer Agreement”, the Broker is expected to ” represent solely the interest of Buyer in all negotiations and transactions regarding the acquisition of real property”. So, a buyer’s real estate agent works solely in their best interest and offers risk management to the home buyers in many ways. This includes advising their clients on potential risks when buying a home; why a home may or may not be a good fit to their needs; and conducting due diligence through home inspections and other contingencies in the offer of sale of a home.
Any buyer who has bought a home and faced challenges understand the value of an expert real estate agent. They are able to mitigate risks for their clients on every level. Examples of risks are: falling victim to fraud, not understanding the legal implications of the sales offers, and property condition issues.
OTHER BENEFITS OF REPRESENTATION
The other benefits of paying for a buyer agent is the value they bring in other areas of representation. By having a written agreement, home buyers understands that the agent works in their best interest at all times. This includes keeping private and confidential information well guarded. Real estate agents also helps to safeguard their clients’ escrow funds through a title company. Buyer agents also help in identifying fraud in a real estate transaction. According to Bankrate.com, wire fraud can occur when a buyer attempts to wire their earnest money deposit to the title company. Another risky transaction is when a lender transfers a buyers mortgage to a third party lender.
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FINAL THOUGHTS
Most anyone who has gone through the process of buying a home understands the value of a buyer agent. The new NAR policies dictate that buyers should be prepared to sign an agreement and be prepared to pay for their own agent at closing. This is if a home seller is not offering compensation. These changes will only improve in-depth conversations between real estate agents and their clients and also improve transparency in the home buying and selling process. This truly is a win-win for us all.
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