I know it’s going to take some time for this to shake out, but I already know of a couple of Real Estate Agents in my area who have told me they will no longer work as a buyers agent because of these rule changes. On the other hand, I’ve had a couple tell me they think it will be business as usual.
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Some speculate that it will lead to an uptick in inspections from potential buyers who would want to know what the home condition is before committing to a realtor. @gromicko maybe some type of campaign?
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I know if I were selling my house that there’s no way I’m paying the BA commission. And if I was buying a house, which I was heavily involved with recently, a few times, with my dad, I did most of the looking and finding, the only thing his agent did was open the house for us and help him complete all the paperwork.
I think that Attorneys may soon be advertising to download their forms for XX amount of dollars and also get one or two consultation calls and fill out the forms yourself.
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I predict an up tick in unrepresented buyers asking us what they should negotiate for based on the inspection.
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I get that on almost every inspection already. 
I do too, and that’s with the agent standing right there next to them. Since most contracts are “void” only and a take it or leave it situation I like let the agent answer and explain that one… There are plenty of nice ways to say “I’m not being paid to tell you what the house should sell for.”
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I’ve had agents call me and ask me what they should negotiate based on the report. 
In this hot market someone I know listed his place and negotiated a 2.5% listing fee. His realtor and he said the buyer can pay his own fee. I hear some agents, both sides, aren’t happy campers.
There’s trouble in paradise.
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Both listing and buyer agents are not happy with this. The sellers have always had the right to negotiate the listing fee that was being paid to the listing agent. The listing agent had the right to negotiate a commission split with a buyer’s agent for bringing a buyer to the table. The seller never was paying for the BA’s commission, the LA was. That being said;
The BA is contacted buy a potential buyer and sets up a search of properties they would like to see. Schedules multiple appointment times and showings. If the buyer finds a property they want to make an offer on, the BA does all the paperwork to present the offer. If the offer is accepted, the BA does all the paperwork for the contract, schedule inspections and follows it all the way through the closing process. This is how they earn there split of the fee paid to LA.
On the flip side, the LA list the property and pays for various things to market the property and put a sign in the yard. With this new “rule”, the LA is going to have to be available at any given time to meet a potential buyer at the property. If the buyer wants to make an offer, the LA has to prepare all the paperwork, inspections and follow it through closing…to earn there 2.5% commission.
Both side aren’t happy campers. But as it stands in my area, it’s business as usual with just more paperwork involved. Sellers are still willing to pay the LA a fee that would cover a split with a BA. The BA has to have a disclosure signed by their client for each house they show on how the BA will be compensated.
Sellers’ not willing to pay for a BA bringing them a potential sale, will miss out on most of their potential buyers.
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With all the online tools these days (Zillow, Redfin, etc.) buyers really don’t need an agent to find a house but most certainly could use a hand getting through the process. Problem is most buyers don’t know what they don’t know and most (first timers especially) certainly don’t have an extra 2.5% in their pocket. Definitely, going to be interesting.
I don’t know if it’s just coincidence but I belong to my local realtor association as an affiliate member and usually get a couple emails a week about meetings and sponsorship opportunities. Once every few weeks someone would send a new listing out to the other member agents (I get the same emails as an affiliate). Over the last couple days I’ve received a couple dozen listing emails per day. I’m trying to figure the angle and how it relates to the new law.
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Back in 2015 when I sold my house and bought my current home, my agent factored the commissions and listing fee into the sale price of the home. Considering the situation, it all worked out in the end. I am sure smart agents will find a work around for the new rule just like they have for many others…
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It’s not a “law” per say. It’s just a new “rule” implemented by the NAR and their members. Most big RE brokers require that their agents be a member of the NAR, causing an ongoing conflict and issue…
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The bottom line is the buyer’s agent commission is now no longer semi-automatic and is an overt point of negotiation for both buyer and seller. It could end up being business-as-usual if buyer and sellers simply acquiesce to the old standards for commissions. The problem is that, given human nature and the opportunities for alternative business models, that is an unlikely outcome.
NAR is saying that commissions were always negotiable, which is essentially true. However, the norms in the industry would mean that if a seller wanted to only pay 4% or 3% or even 2% in total commissions, the potential listing agent would simply say “No” to the deal. Now, they might say “Yes” and reduce or eliminate the buyer’s split because all buyers are now to be represented by a buyer’s agent and required (by NAR rules) to have signed a buyer-broker agreement with details on what the buyer’s agent commission is and options for how it can be paid. My hunch is that the buyer’s broker commissions will more often in the future be handled as an increase to the sale price or concession (credit) from the seller or, for the financially well-off, paid in cash or some combination of all-of-the-above.
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New forms Started yesterday, I am in SoCal in an area where Realtors are very crooked. Their forms as of yesterday had the statement “no inspections” most are not advertising not recommending inspections anymore because they want their money. The new forms require buyer to sign indicating what they will pay the buyers agent before they even show a house. Also they determine right then and there what the buyer will pay them. One realtor said a buyer came in and said $40 an hour for the agents work. Now thats fantastic. Now the Realtors will know how much they are really worth and finallhy work for a living. But all is true. I think inspections will drop.
Factoring in the commissions, escrow fees into the sales price would always be the case if you think about it. Some dumb Realtors do not think like that as I have witnessed over 35 years inspecting. Your Realtor had their act together.
I think we will do fine. What I worry about most are more buyers foregoing working with buyer’s agent, selecting a home to purchase via Zillow (or whatever), and signing a dual-agency agreement with the listing agent. Because of the conflict of interest, that puts the listing broker, now also the buyer’s broker, in a more lucrative, yet vulnerable position. I would expect that many brokers in that position may actually insist on an independent home (pest, sewer scope, well) inspection to help reduce their liability. If they do not, they are opening themselves up to lawsuits.
For over four years the realtors have reduced the Termite inspections in CA forms. We may see that in inspections also. I really agree with you on your thoughts but in CA it is a different animal.
In Ohio, it’s the lenders that require the WDI inspection before they approve the loan. I thought it was the same everywhere, but evidently not.
I’m also finding that as we move forward, lenders as well as insurers are wanting to see the inspection reports too.
Personally, I think the new rules will benefit the inspection industry as more people set out on their own, doing their own research, understanding the process, and realizing the benefits of getting inspections.
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I agree, Kevin.
Agents I know are already seeing people online shopping and they’re happy they moved more toward a listing business model as they, too, see less need for a buyer’s agent. They see many buyers simply using their or an attorney for the documentation, etc.
One thing it doesn’t appear they’ve figured out is how to compensate the listing agent when they get called by a buyer directly to see a house they have listed. The owners of said listings are a pushy bunch, I hear. (Sunday drives alert homeowners of the desire to see the house.)
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At first, I thought this would be one of those turning point things in the real estate world. But as it is shaking out, “Here comes the new boss, same as the old boss.”
We shall see…but for us, it is looking unchanged.