What do the new Real Estate Rules mean for Buyers?
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As of August 17, 2024, the real estate landscape has shifted, and buyers need to be aware of what that will mean for them. Sellers are affected also and we will send a separate newsletter for that.
Here’s a basic summary of what has changed:
Before: Traditionally, buyer’s agents were compensated indirectly through the seller. The commission was typically paid from the home sale proceeds at closing.
Now: Buyer’s agents are required to have a signed buyer representation agreement with the buyer. This agreement explicitly outlines how the buyer’s agent will be compensated. In Colorado we have always used a Buyer/Broker agreement and the compensation is part of that agreement. The new forms have changed somewhat but the compensation agreement is still agreed upon within the form. While the seller may still cover the compensation, the negotiation now occurs directly between the buyer and their agent, as well as between the listing agent and the seller.
These changes do not change our relationship to each other and our duties to you, they simply restate the way that we are compensated when we represent you. Here are the compensation changes:
Buyer’s agent compensation terms: They used to be included in the Multiple Listing Service (MLS). Now, we will call each listing agent prior to seeing the house so that you know whether or not a seller is offering to compensate the buyer broker.
Seller-Paid or Creative Solutions: Our first goal will always be to have the compensation paid for in the scenario that benefits you. While sellers can still cover your buyer agent’s fee directly, there are alternative paths:
Sales Price Adjustment: Increase the sales price slightly and request the seller to cover the agent’s compensation. We will need to ensure the appraisal will support the adjusted value.
Strategic Down Payment: Adjust your down payment strategy. For instance, allocate a portion of your down payment to cover your agent’s fee.
Use your Mortgage: Lenders are aware of the changes and many have products that will allow you to add compensation to your mortgage.
Cash: Use your cash reserves to compensate your agent.
In summary, these changes redefine the buyer and buyer-broker relationship in terms of payment of compensation. As the industry evolves, effective communication and understanding will be key to successful real estate transactions. If you have any further questions, feel free to ask!
As with any significant financial and lifestyle investment, it is important to understand and avoid potential pitfalls. Having a buyer's broker who represents your best interests is what keeps you from making terrible mistakes. Some issues and potential problems that we help you avoid include the following:
Identifying the right properties for your wants and needs: We help to focus your search on the areas and homes that fit your requirements. We talk about features that work well and ones that don't and what might be an issue that you may have with the property when you go to sell.
Confusion over Due Diligence and who pays what and why: We review all Due Diligence, dates and deadlines and which party is responsible for ordering and paying with you. We discuss the options with you and make sure all questions are answered.
Negotiations: Negotiating isn’t everyone’s forte. Fear not! We step into the ring for you. We'll spar with listing agents aiming for the best price, favorable terms, and concessions. Our expertise can save you serious money.
Inspections: We help guide you to the important inspections; what they are, and why and how you should use the inspection process. We negotiate inspection items on your behalf and have many referrals for work that may need to be addressed. We provide a list of inspectors and their specialties to ensure a thorough inspection.
Contracts: Contracts are filled with legalese. We are here to make sure that deadlines are not missed or misunderstood and earnest money is not at risk.
Title: We explain titlework and know what to look for in Requirements and Exceptions so that there are not any title issues after closing.
Loan process: We've got your back with industry-leading mortgage broker contacts. We work closely with you and your lender to get you through the loan process, to closing and into your new home!