I'm a Homebuyer: Do I Have to Pay My Agent to Show Me Homes? Understanding the Recent Changes in Real Estate Law
Buying a home has always been a significant milestone, and the process of purchasing real estate has seen considerable evolution over the past century. Traditionally, real estate commissions have been paid by the seller, a system that has facilitated smooth transactions and incentivized agents to bring buyers to the table. However, recent changes in the law, particularly following the Sitzer/Burnett case in Missouri, have brought about a shift in how commissions can be handled. This blog will explore these changes and what they mean for homebuyers today.
I'm a Homebuyer: Do I Have to Pay My Agent to Show Me Homes?
GoWpNow and The Warburton Team
The Traditional Real Estate Model
For the last hundred years, the real estate market operated under a straightforward commission structure: the seller pays the commission for both their listing agent and the buyer's agent. This model ensured that buyers had representation without having to directly pay their agents, which made the process more accessible and streamlined. Sellers, on the other hand, benefited from having motivated agents working hard to show their homes and secure offers.
The Impact of the Sitzer/Burnett Case
The Sitzer/Burnett case has significantly impacted the real estate commission landscape. The ruling established that sellers can no longer be compelled to set a certain commission rate or guarantee that commission through the multiple listing services (MLS). This change means that while sellers still have the option to pay the commission for the buyer's agent, it is not mandatory
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The Role of the Listing Agent
It’s important to understand the role of the listing agent. The agent whose name is on the sign represents the seller's interests and is contracted to get the best price for the seller. When a buyer contacts a listing agent, the agent's primary obligation is to the seller. While dual agency, where an agent represents both buyer and seller, is lawful in some states, it raises concerns about whether the buyer's interests can be adequately represented. A buyer deserves an agent who is dedicated to their needs, who can navigate the paperwork, and ensure all details are taken care of before handing over the keys.
New Requirements for Buyers Starting August 2024
From late August 2024, buyers will be required to sign a document acknowledging that the buyer’s agent works for them and that the agent will be compensated according to the terms of the buyer broker agreement. This is a significant change, as it formalizes the relationship and payment structure between the buyer and their agent.
Navigating the New Commission Landscape
A skilled buyer’s agent will still negotiate to have their commission paid by the seller whenever possible. However, there are situations where the buyer might need to cover the agent's commission as part of their closing costs. Experienced agents can assist buyers in managing these costs through various means. They may help the buyer secure grants, negotiate seller concessions, obtain lender concessions or use a process often referred to as "stacking" in the real estate community.
Conclusion
The recent changes in real estate law mark a shift towards greater transparency and buyer responsibility in the home-buying process. While this might seem daunting, a proficient buyer’s agent remains a valuable ally, working diligently to ensure that the buyer’s interests are protected and that they receive the best possible terms. Commissions have always been negotiable - and that has not changed. Nobody will work for Free particularly not in a complex transaction - but now the responsibility for those fees has passed from sellers to buyers. Buyers should feel confident in the knowledge that they have an agent dedicated to their success, navigating the complexities of the market on their behalf. Understanding these changes and the new requirements can empower buyers to make informed decisions and secure their dream home with the support they deserve.
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