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To illustrate how the new real estate rules might impact a typical transaction, let's create a hypothetical scenario.
Meet the Players:
Buyer: Alex, a first-time homebuyer seeking a 3-bedroom condo in a bustling city.
Buyer's Agent: Ben, a seasoned agent with a strong track record in the city's condo market.
Seller: Carol, a homeowner looking to downsize to a retirement community.
Listing Agent: Danielle, a knowledgeable listing agent with a deep understanding of the local market.
The Scenario:
Before August 17th, Danielle (Listing Agent) would have listed Carol's (Seller) condo on the MLS, including the standard 3% commission offered to buyer agents. Ben (Buyers Agent), representing Alex (Condo Buyer), would have seen this information and factored it into his negotiation strategy.
Post-August 17th, Danielle's listing will no longer display the commission offered to buyer agents. Ben (Buyers Agent), to effectively represent Alex(Condo Buyer), will need to have a signed buyer representation agreement in place. This agreement outlines the services Ben (Buyers Agent) will provide, including compensation terms.
When Ben (Buyers Agent) submits an offer on Carol's (Seller) condo, he might include a provision about his commission. This could look like:
Option 1: Standard Commission: Ben accepts the standard 3% commission offered by Danielle. The term "standard commission" in this context refers to the typical commission rate offered to buyer agents in a particular market. It's a general benchmark rather than a specific offer from Danielle. (Clarify Standard Commission Rate)
Option 2: Negotiated Commission: Ben proposes a lower commission rate, perhaps 2.5% or even 2%, in exchange for Alex's business.
Option 3: Buyer Pays Commission: In some cases, the buyer (Alex) might agree to pay a portion or all of the buyer's agent (Ben) commission directly. This is less common but could be negotiated.
Danielle, as the seller's agent, will now have less information about the buyer agent's compensation. She might:
Accept the Offer as Is: If the offer is competitive, Danielle (Listing Agent) /Carol (Seller) might accept it without negotiating the commission.
Counteroffer with Commission Adjustment: If the buyer's agent (Ben) proposes a lower commission, Danielle (Listing Agent) Carol (Seller) could counteroffer with a higher purchase price or other concessions.
Seek Clarification: Danielle representing the Seller (Carol) might inquire about the buyer agent's commission structure to better understand the overall offer package.
Key Takeaways:
Transparency is Key: Both buyers and sellers should have open conversations with their agents about compensation expectations.
Negotiation Becomes More Complex: The removal of commission information from MLS listings adds a layer of complexity to the negotiation process.
Strong Agent Relationships Matter: Agents who build strong relationships with clients and other agents are likely to have an advantage in this new environment.
This scenario highlights the potential changes in the real estate landscape post-August 17th. While the exact dynamics will vary depending on local market conditions, understanding these potential scenarios can help buyers, sellers, and agents prepare for the future.
Example Buyer Agent Agreements
Zillow Touring Agreement
See on Zillow (Link)
Arizona Forms and Updates (Link)
Keller Williams New Jersey
New Jersey Buyer Agreement
Maryland and Washington, D.C Agreement
Oregon Buyer Agreement
South Carolina Agreement
Wisconsin Buyer Agreement
What Are Agents Saying on Facebook About The Upcoming Changes?
***Clarifying the Standard Commission Scenario***
Clarify Option 1. Let's break down the potential misunderstandings and offer a clearer explanation.
Understanding the Standard Commission:
The term "standard commission" in this context refers to the typical commission rate offered to buyer agents in a particular market. It's a general benchmark rather than a specific offer from Danielle.
How Does Ben Know the Standard Commission?
Ben, as an experienced agent, would have a general understanding of the standard commission rates in his market. This knowledge is gained through industry experience, networking with other agents, and market research.
Is Ben Asking for a Split of Danielle's Commission?
No, Ben is not asking for a split of Danielle's commission. He's simply indicating his willingness to accept the standard commission rate that is typically offered to buyer agents in that market.
The Negotiation Process:
If Ben believes that the standard commission rate is too low, he might propose a negotiated commission with Danielle. This could involve requesting a higher commission rate or offering additional services in exchange for the standard commission.
Key Points to Remember:
The standard commission rate is a market-driven figure, not a fixed amount set by any regulatory body.
Negotiation of commission rates is still possible and encouraged, even in the new post-August 17th environment.
Transparency and clear communication between agents are essential for a smooth transaction.
By understanding these nuances, both buyers and sellers can better navigate the new real estate landscape and ensure fair compensation for all parties involved
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