If you are a buyer, planning to buy a home, you have probably heard that there are changes coming coming in real estate. These changes are regarding how buyer’s agents get compensated. Some agents have been implementing the changes ahead of time, others are waiting until the deadline, 8/17/24. What will be required starting 8/17/24 is that all agents will need to sign a written agreement with a buyer prior to showing a home to a buyer. This agreement will include language that states how much compensation the agent will receive. Signing an agreement with an agent sounds like a new thing, but it really is not. There is no reason to be afraid of signing an agreement.

Let’s take a closer look at what must be included in the included in the agreement. There are four items included in the agreement between the agent and the buyer. The four requirements are:

The first requirement

The amount of compensation that the agent will be earning needs to be stated specifically and conspicuously. In the past the buyer may not have known what their agent was earning. Now the buyer has a say in how much their agent will earn and who will pay for that compensation.

The second requirement

The compensation cannot be open-ended and must be objective. For the most part, agents working for the seller have been paid whatever the seller decided to offer the buyer’s agent. It was usually a percentage of the sales price of the home. The seller still may pay the agent that sells their home, but the agreement between the buyer and their agent must state specifically what their agent will be paid. The agreement cannot say, “whatever the seller is willing to pay.” The buyer and the agent will agree what the agent will be compensated. They will also agree how the compensation will be earned. The agreement could be a percentage of the purchase price, a flat fee or an hourly rate, as an example.

The third requirement

The agreement between the buyer and their agent will include terms that limit your agent from being paid more than you’ve agreed upon. For example, the seller may be willing to pay the buyer’s agent compensation in the amount of “X” of the sales price, but if you have agreed upon less than that, the seller can only pay whatever amount you have agreed upon with your agent.

The final requirement of the agreement

The agreement must state that fees and compensation are negotiable. Many people incorrectly believe that there is and was a “standard” real estate compensation for agents. They have always been negotiable. Just because they are negotiable does not mean that your agent will be willing to work for whatever fee you offer them. Each agent will have fees they are willing to work for and may not work for less. You can shop around for agents who will charge the lowest rates. Make sure that you know what services you will be receiving. The level of service may be less than the agent that works for a higher compensation.

The changes were made to benefit the public and to make the process of working with a real estate agent more transparent.