Part II: You Want Me to Sign What? Fear of Commitment from the Buyer’s Perspective.
Buckle up, because the new rules are here, and they're shaking things up! As of August 17, 2024, real estate agents in California can't show a single property without a signed Buyer Representation Agreement. Yes, you read that right—you'll need to commit to one agent before even touring a potential new home. Gasp! Commitment? In this economy? Yep, it's happening, so like any relationship, it's all about choosing the right partner.
The Backstory
This change comes hot on the heels of a federal jury ruling in the Sitzer v. National Association of Realtors, et al., case. The result? A major shakeup in who's paying commissions, how they're paid, and a whole lot of job security for transactional real estate attorneys. The endgame seems to be shifting part of the financial burden from sellers (who traditionally footed the bill for buyer's agent commissions) to buyers themselves and to make the issue of who pays what compensation a written term of any offer to purchase real property. But before we dive into the nitty-gritty, let's talk vocabulary. We don't say "commissions" anymore. Nope, that's so last decade. Now, agents receive "compensation," and if a seller covers it, that's a "concession" or a "compensation offer." And, as before, let's remember that compensation is only due and payable if the deal gets done. Got it? Great! Now let's jump into the weeds.
The Buyer Representation Agreement
This document is the new must-have in any buyer-broker/agent relationship. While the fine print might vary between firms, the gist is the same when it's a contract for exclusive representation. Here's what you're typically signing up for:
- Term Length: Usually around 90 days.
- Property Type: Specifies the type of home you're hunting for including the general location, price, size, features, etc.
- Agency Disclosures: Important legalese about the broker's duty to work hard and smart to meet your goals and reference to another required disclosure that explains agency. Some MLS regions rolled out the program earlier and contains an invigorating recital of California Civil Code sections 2079.13 through 2079.24.
- Compensation to Buyer's Broker: Typically, a percentage of the purchase price that the buyer agrees to pay their broker only if a deal gets done.
- Seller's Concession: A discussion about seller's concessions to a buyer's broker and the fact that the concession could be more, less, or nada compared to what the buyer agreed to pay the broker.
- Selective Showing Option: You can tell your broker to skip properties where the compensation offer is less than a certain percentage.
- Negotiation Rights: Your agent can negotiate with the seller to cover the buyer's broker's compensation. Compensation is always negotiable.
- Guaranteed Compensation: The broker gets paid even if you find and purchase a property without them—so no sneaky solo house hunting!
Buyers May Come Out of Pocket
Now, here's where it gets even trickier. If the seller isn't covering the compensation, you—the buyer—will need to come out of pocket to pay your broker, who then pays your agent. Most traditional lenders will not lend buyers' funds to cover the buyer's brokers compensation. This is why it's crucial to work through these details with your agent upfront. The last thing you want is to find your dream home, only to realize you've got to fork over additional cash at closing to cover the agent's compensation. Understanding the terms of your Buyer's Representation Agreement and how compensation is handled can save you from unexpected financial surprises down the road.
No Proof Means No Payment
No one is taking anyone's word that there is a Buyer Representation Agreement. If your agent expects to get paid by the seller, they've got to make a formal demand for payment in the Purchase Agreement (Offer) and show proof of the compensation portion of your Buyer's Representation Agreement. No proof? No payment! It's as simple (and complicated) as that.
Call Kelly
One last thing: Just like any strong relationship, choosing the right partner is key. If you're looking for an agent who's committed to guiding you through these new challenges with expertise and dedication, I'm here to be that trusted partner. Let's work together to secure the best deal for you in this ever-changing market—reach out today, and let's start this journey together. For a confidential consultation, contact me at 916-826-1767 or at [email protected].
