August 17…Real estate changes forever!
After August 17, 2024, real estate won’t ever be the same again.
The National Association of Realtors has settled a nationwide court case which stipulates the way real estate is going to be negotiated from now on. The California Association of Realtors is ahead of the game and is implementing the new rules as of August 13, 2024.
How is the way YOU buy and sell real estate changing throughout the United States?
The big dispute in the class action lawsuit filed in several states against the National Association of Realtors and several brokerages argued that the way realtor commissions were paid was unfair. Historically in the United States it has been standard practice to have the seller pay for the Listing agent commission as well as the selling agent (realtor representing a buyer) commission. The offer for compensation was advertised to buyers on the Multiple Listing Service (MLS) and on public sites. These commissions have always been negotiable. There was a clear cooperation agreement between the brokerages involved in the real estate transaction through which the listing broker would collect both commissions, and at the close of escrow the listing broker paid the selling broker the offered commission.
The National Association of Realtors (NAR) has committed itself to making changes to the way we do business to make it clear that commissions are negotiable, and they can be paid by either party. NAR has decided that by removing the compensation field from the MLS it would create an environment where buyer’s agents’ commissions must be negotiated at the time the offer is submitted. And those commissions could be paid by the seller, or the buyer or both.
As of August 13, 2024, in California, The California Association of Realtors (CAR) will require buyers to sign a buyer representation agreement which informs the buyers of the three ways a buyer’s agent can get paid for their services.
Buyer’s Agent will now receive commissions by:
- The buyer at the close of escrow
- The seller if negotiated with the offer OR split between buyer and seller
- And lastly, it could even be financed depending on the loan, down payment and debt to income ratios (consult with your lender for details about this option)
Sellers have two options:
- Sellers may elect to NOT pay a commission to the buyer’s agent.
- Sellers may elect to offer a certain percentage of the sale or a flat fee to pay towards the buyer’s agent commission.
Buyers now need to be more involved in the negotiations, since they must start by negotiating their agent’s commissions even before they step through the threshold of the first house. Or they can decide to be unrepresented. YES, that is an option now. I would equate this scenario to someone representing themselves in the court of law during a trial. If you are extremely familiar with Real Estate Law, the rights and obligations for both the buyer and the seller, then the unrepresented buyer will be successful at purchasing a home without exposing themselves to liability. Everyone can decide for themselves what the right option would be for them.
But what does this really mean?
Now, more than ever, buyers and sellers need to ensure that they hire an expert negotiator. The consequences of these choices are rarely explained and there isn’t a one-size-fits-all solution. Every real estate transaction has its nuances and there are many strategies that can be implemented to not only accomplish the goal today but to also mitigate risk.
I grew up in Spain, a county where all buyers are unrepresented, sellers aren’t mandated to disclose anything, all sales are final and as-is, and a paralegal is always involved to draft the purchase contract and the deed. These conditions lead to a stagnant real estate market with minimal turnover due to the high-risk conditions set forth as the standard practice.
I am grateful to be a Real Estate Broker in a country where I have a fiduciary duty to my clients, where buyers’ rights are protected by state laws, and where sellers have options.
For all questions or to discuss buying or selling property in the U.S. or overseas, you can always reach me on my cell at 619-453-4513 or via email [email protected].
Raquel Fernandez
Broker Associate
Coronado Shores Co.
DRE #01945891
Cell: 619-453-4513
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