As of October 1, 2019, the Northwest MLS established new rules surrounding the disclosure of how agents in our region get paid.
Traditionally, sellers have paid the commission for both sides of the transaction when a home is sold. Now, sellers do not have to offer compensation to buyer's brokers, which can put us in a bit of a pickle when we are representing buyers! Sometimes we work for months with buyer clients before we find the right place. Just as you expect a paycheck from your employer, we really enjoy getting paid for our time and expertise as well. We have a mortgage and bills just like you! As independent contractors/small business owners, we need to set aside about 30% off the top of our commission for taxes, another 30% or more goes to our brokerage, and some extra is allocated to keep our business afloat. That commission that may seem like a lot to everyone on paper actually turns out to be a lot less by the time we deposit it.
So, just as we have listing agreements with our sellers, we now have buyer agreements with our buyer clients. We’ve actually used these many times over the years, but now they are imperative.
This is just another step in the ever-evolving real estate industry. Up until 1997, Washington real estate agents only represented sellers, leaving buyers out in the cold for representation on what could be the biggest, most complicated purchase of their lives. Now, buyers can have their own team of professionals to help them navigate the transaction process. And that is good for everyone!
Here’s how Annie Fitzsimmons, the Washington REALTORS® Legal Hotline Lawyer describes our new rules:
“The transition we are witnessing will create transparency for consumers as to who pays compensation to real estate brokers and the amount of compensation paid. Although you can still visit the doctor or hire a stock broker without the slightest clue as to the debt you are incurring, most industries reveal their own price tag so a consumer can shop for the product they desire. With that, car manufacturers, for example, are able to sell affordable entry level cars and outrageously expensive luxury vehicles. Similarly, lawyers come in a wide range of hourly rates and billing practices and a consumer should select a lawyer based on the quality of service as compared to the rates charged. Plumbers, electricians and contractors bid work they hope to perform so the consumer can evaluate cost vs. benefit in hiring essential services. Similarly, real estate consumers will begin to have information available to them on the front end of a transaction that allows them to evaluate whether a particular home is affordable to them based not only on the price tag of the home but also, based on the closing costs the buyer will encounter to complete the purchase.” (Washington REALTORS® RE Magazine/Autumn 2019)
What does a buyer’s agent do, anyway? Here is just a partial list:
√ Help you understand the home loan process and help you find a trusted lender.
√ Help our buyer narrow down the type of home, price range, neighborhood, etc.
√ Generate a list of homes that meet our buyer’s criteria, using the MLS and other resources.
√ Set up appointments to access and tour homes with our client to provide info about the property and neighborhood.
√ Evaluate the seller’s asking price based on current market conditions.
√ Put together an offer including any comparable sales data (or “comps”).
√ Educate our buyer about Earnest Money and what it takes to make a strong offer in this competitive market.
√ Discuss contingencies to add or not add to your offer (finance, title, inspection, etc.)
√ Negotiate with the seller and listing agent to determine a mutually agreeable sale price.
√ Prepare and execute the contract with all the legally required paperwork.
√ Help you find the right home inspector and any additional experts needed and attend the home inspection(s).
√ Negotiate any repairs and costs associated with those repairs.
√ Ensure that every part of the contract is completed for the closing process to occur on time.
√ Work with the seller’s agent to achieve a win-win for both sides of the transaction.
...and anything else needed to close our transaction.
And that's where the Buyer's Agency Agreement comes into play. It is a contract between us and our buyer clients that says we are representing you in your home search, negotiating your purchase, and that we will be paid for our expertise--and **IF** the seller is not offering compensation to the buyer's agents, together we can negotiate an acceptable commission with the seller. We have yet to see sellers offering no commission for the buyer's side, but it could happen, and the contract that we have with you safeguards us and makes it transparent to you that we only want to be fairly compensated for our work. Sellers who offer little to no commission may have a hard time selling their homes.
Here's an example: let's say you've found an amazing place you want to put an offer on--and it's priced at $400,000. We see that they're offering a 2% commission, but in our signed buyer's agency agreement, it states that we will accept the commission published in the MLS, but not less than 2.5%. We are asking you to give us the right to negotiate for the extra .5% that we need in order to be paid adequately for our expertise and efforts on your behalf.
This is the logo for the Accredited Buyers Representative awarded to REALTORS® who have completed extra coursework along with a rigorous test and a certain number of buyer-side transactions as required by the National Association of REALTORS®. Ann has earned this designation and is ready to go to work for you today! Between the two of us, we've got you covered.