Buyer Agency Law Changes
Taking a break from our regularly scheduled fun blog programming to discuss some fun industry changes!
If you have been following the news in recent months, you have likely seen The National Association of Realtors (NAR) has settled with groups of home sellers related to commission fixing. The settlement has had a wide impact across the country and the impacts of its subsequent rulings have reached our Indiana market today. The changes most immediately affect potential home buyers.
Our goal is to arm you with all the information possible at this time as we all wait to see how these changes evolve in our market.
How Buyer Agent Commissions Worked Pre-July 1st:
Sellers determined the amount of Buyer Agency Commission (BAC) they would offer in their listing contract with their Listing Agent. This amount was always negotiable, but often ranged in the 2.5%-3% range, depending on the price point of the home.
Commissions were posted on the MLS showing what the seller was offering to pay the Buyer’s Agent (see example below)
While Buyer Agency Agreements have always existed, they were underutilized and not required. Buyer’s Agents could show buyers homes without a signed agreement and some more casual buyers would use multiple Buyer’s Agents to tour different homes. A Buyer’s Agent was only compensated if their buyer received an accepted offer and closed on the home. Commission was paid via the Seller from their proceeds at closing.
How Buyer Agent Commissions Work Now, Post July 1st:
Sellers will still determine the amount of Buyer Agency Commission (BAC) they will offer in their listing contract with their Listing Agent.
Buyer Agency Commission cannot be listed on the MLS. It can be shared via communication with Buyer Agent and Listing Agent, brokerage website, social media, etc., just not on the MLS.
Sellers and their agents can (and likely will) still offer buyer agent commissions, it just cannot be listed on the MLS.
This is the point with the most immediate impact to our clients. Buyers working with Buyer’s Agents must enter into a written representation agreement with their agents. If you have sold a house, you will remember a listing contract with your agent had to be signed before listing. This is now required on the buying side too. This means if you want to pop in and see a house, we can't open the door without getting a buyer agent agreement signed.
Buyer Agency Agreement Quick Overview
When do we have to deal with this?
Must be signed before an agent shows a house.
What is it?
Written representation agreement that formalizes agency relationship between agent and their buyer clients.
Does this change how a buyer agent is paid?
This contract outlines the financial obligation that a buyer is committing to their agent at closing for services rendered. HOWEVER, the buyer agent can still seek to have the buyer agent fee to be covered by the seller. In the event that the seller will not pay a commission or will pay less than the agreed upon percentage of commission, the buyer will be responsible for the commission difference. K&C will work to collect agreed upon commission from the seller as we have historically done in the past.
Buyer agents can collect a retainer fee from clients. K&C will not be collecting a retainer fee from any potential buyers.
What else should I know?
Buyers must be careful and sign only one contract with one agent at a time.
An agency contract with one member of the team will allow you to view houses with any member of the team.
This contract formalizes our fiduciary responsibility and duty to you as a buyer client.
All Indiana realtors must legally get this document signed.
We will keep you updated with the transparent, candid communication you can always expect from our team. In the meantime, we will continue to focus on providing the utmost value to every client with exceptional customer service, attention to detail, market expertise, and a high level of quality with every interaction!
Our goal is to give you as much information as possible and this will likely be evolving as the changes settle into our market. At this point, no action is needed until you want to see a home at which point a Buyer Agency Agreement will need to be signed. We can discuss the document and overall changes live and please feel free to reach out with any questions at all!
As always, we greatly appreciate your business and trust in us. We will navigate these changes together and know that we will always put the interests of you and your family first!
