New Buyer Rep Process FAQ

EFFECTIVE AUGUST 17, 2024

 

Each and every buyer looking to purchase or even tour any property MUST sign a “Buyer Representation Agreement” before walking into the first property. This form isn’t required for an open type visit, public. However, before any real buyer information is relayed to an agent on duty this form or some similar approved disclosure needs to be signed. The Agent at an open house represents the seller. Even if they aren’t the actual listing agent they are licensed with the same company. It’s too easy to get in an “open house agent” conversation where too much information could be shared. All of the above has been designed for the good of the public, buyer and seller and It’s required of every REALTOR.   Here is the most current Arkansas form ⇓

2024R Exclusive Buyer Agency Sample Form

CANT” YOU JUST SHOW ME THE HOUSE?

Not anymore. Not without a prior signed buyer representation agreement. As of August 17, 2024 NO REALTOR will be able to tour/show a home to a buyer without that person/persons signing a rep agreement first. Any deviation, non compliance is a clear violation of the recent NAR settlement terms. It’s not a me or company kind of thing! It’s non-negotiable, required as part of a legally binding settlement for all REALTORS.

WAIT! WHAT DO I HAVE TO SIGN?

The Buyer Representation Agreement is between the Buyer, and their REALTOR. It outlines the roles and responsibilities, the buyer REALTOR company compensation, how it’s paid who pays for it. The compensation/commission percentage/dollar amount stated in that agreement is the MAXIMUM amount a REALTOR company representing a buyer can receive from the transaction. It spells out any potential costs or charges, if any, that the buyer might have to pay on their own. It could be as easy as a non-exclusive agreement for one property on a certain day. Or an exclusive agreement could be used that’s much more versatile.

The use of CBRPM anywhere here is Coldwell Banker RPM Group and BAC refers to Buyer Agent Compensation.

SO, BUYERS NOW HAVE TO PAY A COMMISSION?

 

Well, yes…..but actually, maybe no, probably no, Sometimes no. Maybe part of it? Confused yet?  Too many agents are confused, but it’s starting to clear up pretty well I’m happy to say. I have a good handle on it and a plan for it. The agreement states that the Buyer is responsible for compensation to their broker/agent company except in some situations. There are many if not most situations where the seller or the Listing Broker has agreed to cover the cost. In that common situation it’s really so different than it always has been. I’m going to use a $300K home sale in the examples below.

Assume a buyer has signed a 90-day exclusive agreement that includes 3% buyer broker compensation to be paid by the buyer at the closing. There is also a flat $195 administrative fee aside from the commission. There are no upfront costs. If you don’t buy there is no cost. If you purchase and fail to close there is no cost. That same agreement might note some wide range criteria like “Any home located in Arkansas” for the duration of that agreement or it could state a short list of counties instead. Now we also assume we’re in the looking and showing of actual properties of interest to you after signing the agreement.

I will inquire and solidly confirm for each individual property while setting an appointment what BAC is offered, if any by the seller or listing company up front. We must know the buyer’s potential cost, if any for each home. And, we will be ready if any potential written offer needs to include a request for an amount of BAC to be paid by the seller or listing company upon a closed sale. Let’s move ahead now and say we’re looking at just three homes on a particular day with the following BAC confirmed by me as used in the possible situations below.

House #1. The listing agent confirms with me that the seller is offering 3% towards buyer agent compensation. The compensation paid by the buyer to CBRPM at closing is $195.

House #2.   The listing agent confirms with me that the seller is offering 2% BAC. The balance of 1% or $3,000 plus $195 would be charged to the buyer on the settlement statement at the closing. However, assuming we write and offer asking for 3% to be paid to a buyer agent and the seller agrees and accepts in writing. The BAC costs to the buyer at the closing is the same $195 as House #1.

What if the same offer requesting 3% BAC is countered by the seller and they offer to pay 2.5% BAC? Technically the buyer would be responsible for the additional .5% or $1,500 plus $195 at the closing. My personal method for this common example would be to amend our original buyer rep agreement to 2.5% BAC instead of 3.0% ending in the same cost of $195 to the buyer at closing. This rep agreement change would be signed ahead of your acceptance of such a counteroffer and you would know any out-of-pocket BAC costs.

House #3. This seller says no way, no how! They’re not offering any buyer agent commission at all, zero. We would both know that ahead of any showing. You could choose not to tour that home at all. You could go forward and if an offer was written we could include some percentage or amount to be agreed to by the seller anyway, just like other negotiated items in the offer. Based on the seller response or counteroffer you would again be aware of the exact cost to you before making a decision to go forward. If the seller sticks hard to the zero-buyer agent compensation, then a buyer would be responsible for the 3% BAC plus $195 from the rep agreement if they accepted that seller counteroffer. I would personally reduce that at this point to the same 2.5% as used above. But, that’s still plenty of money paid by the buyer. This example is not something that has ever been typical and I think it will still be very rare going forward. But It may come up occasion in this new environment.

There will be variations of all these examples. The important takeaway is that you will ALWAYS be made well aware of the potential cost to you, if any, for any buyer agent compensation before acceptance of any real estate contract.

The $195 listed throughout the examples is our own CBRPM company fee. The agent does not share in that. It goes straight to the company. There are not many companies now without a similar charge. Many are higher and even a few companies that might charge $500 or more  for that admin type fee. It’s a cost to a buyer OR a seller aside from any other compensation agreed to up front. Even the $195 could potentially be paid by a seller for you as a concession in cases where an offer might be written to ask the seller to “Pay buyer closing costs and pre-paid items up but not to exceed $_,___ including buyer agent company admin fee. There are options.      

   

HOW DID WE GET HERE? WHY DID THIS DRASTIC CHANGE HAPPEN?

Historically, Sellers paid the Listing Broker a commission, which was then shared or split with the Buyer’s Broker. However, this led to a misunderstanding that “The Seller must pay” the Buyer’s Agent,” which isn’t entirely accurate. This resulted in a class-action seller lawsuit, driving these changes. They were led to believe a buyer agent commission was required of them. With the new NAR settlement, Agents/Brokers cannot advertise ANY compensation via the MLS or similar portals. This means that Buyer’s Agents aren’t guaranteed compensation like before. Would you work for no compensation? Prior to this every single listing in the MLS stated exactly what the seller or listing company was offering towards buyer agent compensation. That system worked too well and was way too seamless for about 75 years to be left alone apparently. The resulting settlement from that lawsuit can potentially harm buyers more than any change ever implemented in the industry. That’s just my opinion. There are ways to mitigate it though.

WHAT IF I DON’T LIKE MY AGENT? CAN I GET OUT OF THIS AGREEMENT?

The agreement will outline the termination or cancellation process and any costs, if any. So, it’s crucial to select your Buyer Representative carefully. Please remember that specifics can vary from state to state, so be sure to clarify the terms before signing. My goal here is to describe the process for Arkansas transactions as best I can.

GOING FORWARD

This new process is still a moving target and more changes, especially in forms are still happening almost weekly. This new rule with the Buyer Representation Agreement is just one aspect of the NAR settlement, which is rapidly changing the real estate industry nationwide. Commission/Compensation is negotiable. It always has been. It has been decoupled now and it won’t be going away. I hope this post helps and provides some clarity. I’m happy to answer any questions or concerns about the process going forward for yourself or someone that wants to know. Commission is always negotiable. But premium service is standard. Thanks for your time here!