By Joe Kohn
The forefront of real estate news is that the National Association of Realtors has settled a pretty big lawsuit for a large chunk of money.
The new procedures which Buyers and Sellers are currently faced with officially started on August 17. There are new forms which Buyers are required to sign before touring their new home. Sellers may have also been advised on the revised commission/compensation structure outlined in the NAR settlement.
Basically, the settlement has changed how Sellers and Buyers pay their Realtors. Sellers are now required to pay their Realtor, and the Buyers are responsible for paying their own Realtor. Buyers will also be required to execute a showing agreement and/or an exclusive Realtor consumer agreement with their Realtor prior to touring a property. Find your perfect home by visiting My Florida Insider today and exploring our listings. Adding to the confusion is that there happen to be many different versions that Realtors may use. Some real estate offices have chosen to draft their own versions for a lot of reasons. As a real estate attorney for over 27 years, and also a Realtor, I have chosen to draft my own version as I personally feel that the versions offered to Realtors are a bit confusing and may cause unintended legal consequences for the Buyer.
What has changed? Before August 17, the Buyer could call up as many Realtors as they wanted and have any or all of them show them as many properties as they could possibly handle in a given time period. NOW if you are a Buyer and your Realtor is searching for a residential property on the MLS, the Buyer will be required to enter into a written agreement with THEIR Realtor.
These Buyer/Consumer agreements must include the specific amount that the Buyers’ Realtor will be charging the Buyer for their services, paid for by the Buyer at closing. This compensation can be in the form of a flat fee, an hourly fee, or a percentage of the property’s purchase price. Remember this fee MUST be disclosed and negotiated in the Buyer Agreement, which must be signed prior to viewing any property on the MLS.
In reality, the Buyer will most likely sign an exclusive agreement with their Realtor with a beginning and end date that will also include the negotiated compensation between the Buyer and their Realtor. Let’s assume that it is the so called standard agreement wherein the Buyer agrees to pay their Realtor 3% of the purchase price.
Let’s say Realtor found a new home with a purchase price of one million dollars. Lets also assume the Seller of the property has agreed to pay their own Realtor a fee and has also agreed in their listing agreement to pay the Buyers’ Realtor a fee of 2% of the purchase price.
In this example, the Buyer would be obligated to pay their Realtor $30,000 at closing as agreed upon in their exclusive consumer agreement with their Realtor. The Seller has offered to pay the Buyers’ Realtor 2% of the purchase price which is $20,000. This $20,000 would be used towards the $30,000 and therefore would reduce the final amount owed by the Buyer to their Realtor to $10,000, and unless the Buyer and Realtor agreed to modify the agreement to waive this additional amount, the Buyer would still be obligated to pay their Realtor at closing. It will be interesting to see how this will actually play out. So, Buyers be careful as to what you are agreeing to when you execute those agreements.
I personally think that once the smoke clears and the confusion wears off, Buyers and Sellers will benefit upfront from having a clear and concise Buyer consumer agreement which discloses all of the fees to be paid at closing.
For more information on Rock and Roll Realtor please call Joe at 954-270-1000 or Annette at 954-599-3373.
