I'm Selling My Home - What Changes on August 17th?

The changes that go into effect as a result of the NAR settlement are quickly approaching, but what exactly does that mean if I'm selling my home - or getting ready to sell? We're here to clear up the confusion and simplify what is happening and what is about to change.

Where we stand

For us here at The O'Hara Group, it's business as usual, as we believe it is for most veteran agents, but with some additional education and guidance. One of our core principals has always been educating our clients, so that won't change; what will change is the content of our education.

Offering compensation to buyers agents is NOT REQUIRED, but it is in your best interest to do so

Whether to offer compensation to a buyer’s broker, and the amount of compensation you may decide to offer is purely your choice. You are not required by law to offer such compensation, and all compensation is fully negotiable. However, so that you can make an informed decision, and to help you understand why we  recommend that you make such an offer, we wanted to share why we believe there are significant benefits to doing so. 

Stated simply, the most significant benefit of offering compensation to a buyer’s broker is to help make your property attractive to the widest possible pool of potential buyers. We believe there likely will be a reduced number of potential buyers who are interested in looking at a property that does not offer buyer agent compensation for several reasons. 

FIRST, some buyers may not have the cash to pay their own real estate agent out of pocket. Often buyers need their cash for the down payment and other expenses, and typically buyers cannot finance a brokerage commission through a mortgage. So, buyers without the necessary cash will not have the option of borrowing the money to pay for their own agent. Those buyers may be unwilling to consider your property if it’s important for them to have an agent representing them. 

SECOND, in our experience, the seller benefits from the buyer having an agent because with two expert representatives who are both actively working to close the transaction, it is more likely that issues will be resolved and buyer and seller will reach their preferred outcome: a successful closing. Without an agent representing the buyer, the buyer may not be able to navigate the complexities of making an offer and including all necessary documents, meeting timelines, understand HOA and other association requirements, understanding how to address issues that arise in a home inspection and appraisal, obtaining financing, preparing for settlement, and more.

As a result, the closing process can take longer, and other complications can arise that are less likely to occur if the buyer is represented by a professional real estate agent. Delays in the process can cost you in several ways – greater carrying costs, disruption of the process if you need the closing funds for a new home you are purchasing, or delays or losses incurred if a home needs to be re-listed. As a seller, one of the worst possible scenarios is that your home receives a contract, falls through, and is then re-listed, as this can be stigmatizing to your property.

With two expert representatives who are both actively working to close the transaction, it is more likely that issues will be resolved and buyer and seller will reach their preferred outcome: a successful closing

Our recommendation is that it is a smart financial decision to make your property attractive to the largest number of potential buyers possible. Experience has shown that this is a good way to create demand, and potentially competitive bidding for your home – with the goal of generating the highest demand, fastest sale, and potentially the best price for your home. 

Will Offering Compensation to Buyers Agents Make My Home More Attractive to Buyers ?

We think so. Buyers often have significant costs they must pay during the home buying process, such as  homeowner’s insurance, pro-rated property taxes, movers, contractors, down payment, costs charged by  lenders and title companies, home inspection and appraisal costs, and attorney’s fees. Your home will be  competing against some (likely many) homes that will pay the buyer broker’s compensation, which could make  those houses more attractive to a buyer because it will mean less money out-of-pocket for the buyer at closing.  Consider how much longer it might take to find a qualified buyer or how much less you might get in the sale of  your home if buyers found it less attractive. 

Another significant benefit of offering compensation to the buyer’s agent is that it generally increases the  chances that the buyer is represented by a licensed professional who will manage their side of the transaction: explaining the home buying process, setting expectations, arranging a pre-approval with a lender, showing  homes, negotiating the purchase, coordinating inspections, helping to coordinate title insurance and closing  services, and managing the myriad of details needed to close a home efficiently and seamlessly. 

So, you get a signed purchase agreement…great. Then something happens that the buyer is not prepared to  deal with. The sale either falls through or takes much longer to close. Our goal as listing agents is to make sure that your  transaction goes from contract to close and manage the process throughout. A buyer’s agent also facilitates  completion of the transaction because they are there to advise the buyer how to work through these issues. 

What happens if my home is currently listed with an offer of compensation for buyer agents?

If your home is currently listed, your agent will need to remove the offer of compensation from the MLS prior to August 17th. This offer of compensation will need to be communicated to potential buyer agents separately, and potentially can be part of the negotiation process when you receive an offer.

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SELLER FAQ

Q: Am I required to make an offer of compensation to the buyer’s agent? 

A: No. Buyer compensation is not required by law, local MLS requirement, or company policy. All agent compensation is fully negotiable. 

Q: Will buyer agents refuse to show my home to buyers if I do not offer compensation? 

A: No, but the buyers themselves could decide that the additional costs associated with your home make it less attractive or even unaffordable and therefore choose to look at other properties where there is an offer of compensation. 

Q: Is buyer agency compensation illegal? 

A: No. It is perfectly legal for sellers to offer to compensate buyer’s agents. The point is it is completely your choice and there are sound reasons for doing so. 

Q: I saw a story about a legal case where real estate companies were sued for illegally requiring buyer agency compensation. 

A: While it is complicated, and I cannot provide legal advice, that suit dealt with some MLS rules that required sellers to make an offer of compensation to a buyer’s agent to list the property on the MLS. You are not required to offer compensation to a buyer’s agent to list your home. You can choose to do so or not.

Q: Is it possible that I will be asked to compensate the buyer’s agent when they submit a  purchase offer to buy my home? 

A: That is possible. If no offer of compensation is made with the listing, the buyer might ask that you agree to pay his or her agent as part of their offer on your house. The thing you must consider is whether certain potential buyers might not reach out to you because they find a different home more attractive because it offers to pay buyer compensation from the outset. 

As always, reach out to The O'Hara Group anytime will more questions on this complex issue - we are always here to help!