Yesterday’s blog post identified one solution for buyers which we’ll call the Gunslinger Special – where you wait patiently for the perfect home and when it hits the market, call JtR and give it everything you got.
What are the other options?
First, let’s note that you will get credit for any seller contribution to the buyer-agent fee. On my 2% Gunslinger Special, I’m going to try to get the seller to pay all of it, and sellers who are offering 2.5% means you get the 0.5% extra paid towards your closing costs. The form you will sign states this clearly, and it will apply to any agent you hire.
But it will be smart to expect to pay all the fee, and if the seller happens to pay some or all of it, then yippee. Why? Because the hot buys – the houses you want to buy – will probably have multiple offers. You don’t want to lose out because you insisted that the seller pay some of your agent fee. Eventually, there won’t be any seller contributions any more, it is just how fast we get there.
Option B – You are early in your search, and you’ve already experienced the pesky open-house agents hounding you to sign an exclusive-representation agreement. But the idea doesn’t sound too bad because you know you need to hire an agent to see homes for sale that aren’t open houses, and you wouldn’t mind the extra help.
Their fees will vary wildly. Any agent who is charging 1% or less is only looking to open a few doors and have a $500 transaction coordinator manage the paperwork for you. Those who charge more will razzle-dazzle you with their list of 10,000 Things I Do For You.
Have them show you one house as a trial before signing. If they say anything about a “dream home” or only identify the name of the rooms when touring the house (“here’s the kitchen”), know that you can do much better when hiring an agent.
You will end up making a decision based on your gut feeling, but no matter who you hire, check their Zillow profile. Punch their name and the word Zillow into Google search, and it will pop right up. Here’s mine:
If the agent works on a team, read through the reviews to find their sales and see what their buyers had to say. Being the “Neighborhood Expert” isn’t nearly as important as having a solid and recent history of closing sales with buyers.
When you go to sign their form, choose the option that you can cancel any time.
Option C – Go direct to the listing agent. Don’t do this just to get a piece of the commission by reducing the price or having them pay your closing costs – it’s doubtful either will happen. Go direct to the listing agent only if you are absolutely desperate to buy this home. It’s likely that you’ll still have to pay well over list and get little or no help, but hey, you should get the house!
You will still have to hire them as your agent to buy the house, and it is inevitable that every listing agent will have you sign this form to say you are unrepresented, and they don’t owe you anything. It will make you think about getting good help on your side, but once you engage with them, it will be too late. They will hold it against you and sell the house to anyone else just tp teach you a lesson.
All of these options are terrible, and I apologize on behalf of the real estate industrial complex for screwing up this lawsuit so bad that it makes home-buying more difficult. Trying to buy a house is difficult enough!
If you want to avoid this misery, buy a house before August!
The U.S. Department of Justice broke its silence in court on Tuesday on the impending changes coming for the real estate industry in the wake of settlement agreements by major brokerages and the National Association of Realtors in what experts say was a statement Realtors should heed.
During a status hearing for a case in Massachusetts, Jessica Leal, an attorney for the DOJ, said the regulator would neither support nor oppose the NAR settlement agreement, which will lead to sweeping rule changes this summer. “We believe offers of compensation should not be made anywhere, but certainly not on the MLS,” Leal said.
Without any advertised commitment to pay them a commission, what will buyer-agents have to endure? At best, the seller-paid commission will be a moving target, and many, and probably most times it will end up being peanuts. Any agent who expects to be a successful buyer-agent will have to become experts at having their buyers pay them.
But even if an agent can get buyers to sign a commission agreement, the process of buying a home around here is very difficult. I have an entry-level buyer right now who is making full price, all-cash offers, and over the last 45 days has struck out six times in a row.
Buyer-agents are being squeezed out by several market forces, and who will mind? The lack of transparency and the games the listing agents play are so unsavory that buyers and their agents will have to be extremely motivated to succeed just to eventually buy something. Agents won’t want to represent buyers under these circumstances, and just quit instead.
The real issue now is that buyers HAVE to hire a buyer-agent in writing to buy a house. Once they figure that out, will they investigate the choices carefully, or just grab someone? Or have Aunt Bea handle it? Or just go to the listing agents? Once the frustration sets in, going to the listing agent will seem like a way to improve their chances.
But the old-school listing agents will cop an attitude and either not want to do dual agency at all, or they will want the buyers to be unrepresented. Progressive listing agents will encourage buyers to come to them directly, and it is inevitable that it will become the prevailing trend. It’s how the commercial brokers do it, and it’s mostly because agents don’t like other agents – not because it is what’s best for the buyers and sellers.
These agents discuss some of the pitfalls here. They have built a realtor team of 51 agents since covid, and have sold 448 homes in Connecticut over the last 12 months – so they are in the game. But they don’t come up with any perfect solutions – because there are none:
In other words, it’s going to be a mess of a market as agents turn their focus on getting buyers to sign an exclusive agreement. It will just complicate further what is already a very challenging environment.
While management believes that buyer-agents will adapt and the implementation of the buyer-broker agreement will happen over the next few months, I have my doubts. It’s more likely that buyers will resist paying 2% to 3% to their agent, unless they are convinced that they can Get Good Help.
Without having to commit to paying anything to buyer-agents up front, sellers will choose to pay less or zero once an offer is submitted, and their listing agents will just let it go and just be thankful that they will be getting paid.
Buyer-agents will either have to accept the peanuts the sellers will be paying (0.5% to 1.5%), and/or talk their buyers into paying the rest. Or they will ‘retire’, which sounds groovy to the agents who are 50+.
Left in the rubble will be home buyers who are mastering the matterports, and listing agents who desperately want buyers to come to them direct.
The form above will be the gateway drug to the future.
It will be used as a defense mechanism by listing agents who resist giving any of their commission to the buyers (who are thinking they deserve a bonus for coming direct).
“Yes, come direct to the listing agent so you don’t have to pay a commission”, and once you get here then sign this form and be unrepresented. Everyone saves!
If commissions are less, agents will want to do less. For those agents who already don’t do much, it will be a struggle – but they will find a way!
They aren’t going to step up and justify why every buyer deserves good representation.
Instead, they will do nothing for you. Sign the form above and good luck getting to the finish line!
In a marketplace where the stakes are rising every day, there will be a growing trend of getting less help – and virtually no Good Help available unless buyers want to pay for it themselves.
Everyone thinks that commissions will be negotiated with the offer. On the surface, it seems like a reasonable solution, but it will depend on whether the listing agent will stand up for their fellow agents getting paid, or wimp out and hide behind the seller.
The conversations will go like this:
Listing Agent: We finally got an offer on your $3,000,000 home!
Seller: How much?
Listing Agent: $2,900,000!
Seller: LOWBALLER!
Listing Agent: Well, we’ve been on the market for two months so buyers tend to come in lower.
Seller: Counter $2,980,000. I’ll pay his 2.5% commission at that price.
Listing Agent: Ok, I did that and they countered $2,950,000.
Seller: That’s ridiculous. But I’ll take it and penalize the agent instead. Pay him 1%.
Listing Agent: Good idea – you actually come out with MORE money that way!
Listing Agent to Buyer Agent: You got your price!
Buyer Agent: But I got screwed on the commission!
Listing Agent: Sorry, dude, but the seller insisted. Get it from your buyer!
Will agents stand up for one another? It’s doubtful, especially when ‘negotiating the commission with the offer’ literally means the commission paid by the seller could be anything, including zero.
Until the end of July, the commission rate offered by the listing agent in the MLS is set – the listing agent doesn’t get to change it later, which is a great relief to the buyer-agents.
But after July, the burden is going to be on the buyers to pay their agent’s commission too. Higher prices, higher rates, substantially more closing costs, and unrelenting sellers…..how much more can they take?
A new $3,000,000+ listing hit the MLS this week that was offering a 1/2% commission to the buyer’s agent.
They also noted that to show the property, buyer-agents needed to submit proof of funds (bank statement) and pre-approval letter plus a 24-hour notice was required. Only one photo was included and no videos or matterport. In other words, they aren’t interested in incentivizing the buyer-agents – instead, they will make it as tough as possible for them to earn a living here.
It’s ok with me if you want to publicly embarrass yourself in front of your fellow realtors.
But know that you are also contributing to the demise of buyer-agents.
When other agents see that you have no regard, or respect, for what buyer-agents do, then they will learn from you – and assume that this must be how the future of commissions is going to play out. Then they will do the same thing.
Because ‘commissions are negotiable’ is such a touchy subject, nobody in the business talks about it. But we should discuss the role of the buyer-agent, and how they will soon be extinct – which is NOT good for anyone involved, especially the buyers.
There are two other new listings this month (of 63) that are offering NO buyer-agent commission.
The agents are happy to note that it will be negotiated in the offer. Your list prices are ridiculously high, you make it hard to show, and you refuse to offer ANY commission rate? Why is that a sound strategy? How does that make any business sense?
If the listing agent is unwilling to commit to paying any commission, then they must be thinking that the eventual rate negotiated with the offer will be less than 2% – because if the listing agent was willing to pay at least 2%, they’d would publicize it as a feature, wouldn’t they?
These are listing agents that prioritize the torture of the buyer-agents over what is best for their seller. It’s a very strange control/dominance issue – and they should really seek some help with that before they take another listing.
As the market slows down – and the commission debacle will be a contributing factor to the slowdown – the buyer-agents will be needed more than ever. Will listing agents adjust in time, or just blindly run off the cliff like a lemming? I don’t have a lot of faith in the former.
‘What are you going to do about these buyer-broker agreements?’
I told Donna yesterday that I’m probably not going to do them, at least not much. Oh, but you have to do them! Yeah, I know, but it probably means that I won’t work with buyers as much.
This guy gets into the details on what the NAR settlement terms actually mean:
This allows buyers to choose to have a transactional relationship where the Realtor® assists in property viewing without representing the buyer’s interests as an agent. The agreement can be as brief as the buyer wishes, possibly just covering a single day of home viewings or a specific number of properties, without further obligations.
But I don’t want to drive you around for a single day for free. I want to sell you a house!
But buyers aren’t thinking about buying a house today. Why? Because they haven’t found the perfect one yet, and they have an urge just to keep watching Zillow until the ‘right’ house pops up. Ask any buyer and they will tell you, “I’ll know it when I see it”.
That’s when I want to be there.
Especially when most buyers think they don’t need me until then anyway.
I think there will be a few professional gunslingers who have the reputation of being the guy you call when you absolutely, positively need to buy that house.
In the meantime, buyers will stay close to their search engine, utilize the matterport tours extensively, and go to an occasional open house.
When they find the ‘right’ house, they will call me, or just go through the listing agent.
Every buyer will be required to hire a buyer’s agent at some point. Get Good Help!
Now that NAR’s proposed settlement of the Sitzer/Burnett lawsuit has received preliminary approval, the industry is receiving numerous updates about the future of real estate practices.
One change, set to take place in July, is that home buyers will be required to have written agreements with real estate agents before touring properties.
Although Zillow is not required to offer consumer-facing agreements, it recognizes that this step can foster transparency, open communication and better alignment between agents and clients. It also understands that buyers may hesitate when it comes to signing a long-term contract with an agent they don’t know.
To help solve this problem, Zillow is offering a non-exclusive touring agreement for agents to use.
In the announcement, Errol Samuelson, Chief Industry Development Officer stated, “…insisting that a buyer sign an exclusive, long-term agreement with an agent, perhaps before even meeting the agent, feels premature. That’s why Zillow has created a non-exclusive touring agreement, and we’re making it available for use to the entire residential real estate industry.”
With this agreement, neither exclusivity nor compensation is required. Zillow suggests negotiating these aspects after the initial meetings when both the home buyer and real estate agent are comfortable moving forward.
“At the time when an additional agreement is signed, the buyer and the agent should be aligned on all terms and expectations, including compensation, with no surprises,” Samuelson said in Zillow’s post.
While this agreement benefits buyers who are not ready to fully commit to an agent before touring a property, Zillow also emphasized the value agents bring to transactions, noting that agents help ease the complexity and stress involved in buying a home.
Zillow is encouraging agents to embrace transparency and prioritize building trust with clients, and the group is offering its touring agreement to all agents.
“As we move forward, it’s important to remain focused on who the real estate industry serves: buyers and sellers,” Samuelson stated. “In this moment of evolution we’re extending an invitation: join us in putting consumers first.”
“Buying a home is complex and often comes with a lot of stress: half of buyers tell us they cried at some point during the process. Without an expert prioritizing their individual needs, buyers can miss out on making a competitive offer, leave money on the table in the negotiation, ignore potential pitfalls or waive important aspects such as inspections – which can end up costing them later. Most buyers want and need an expert on their side – we don’t see that changing. This makes finding the right agent that much more important and it’s why upfront conversations about expectations and compensation are critical. We strongly believe in the value of independent representation: buyers and sellers deserve to work with an agent who is committed to their best interests and only represents them.”
The undated FAQs were released today. Buyers don’t have to sign a written buyer-agent agreement just to tour an open house! The clarifications from NAR:
The practice change requiring written agreements with buyers is triggered by two conditions: it only applies to MLS participants “working with” buyers and is triggered by “touring a home.”
What does it mean to be “working with” a buyer?
The “working with” language is intended to distinguish MLS participants who provide brokerage services to a buyer — such as identifying potential properties, arranging for the buyer to tour a property, performing or facilitating negotiations on behalf of the buyer, presenting offers by the buyer, or other services for the buyer —from MLS participants who simply market their services or just talk to a buyer — like at an open house or by providing an unrepresented buyer access to a house they have listed.
If the MLS participant is working only as an agent or subagent of the seller, then the participant is not “working with the buyer.” In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.
Authorized dual agents, on the other hand, work with the buyer (and the seller).
What does it mean to tour a home?
Written buyer agreements are required before a buyer tours a home for sale listed on the MLS.
Touring a home means when the buyer and/or the MLS participant, or other agent, at the direction of the MLS participant working with the buyer, enter(s) the house. This includes when the MLS participant or other agent, at the direction of the MLS participant, working with the buyer enters the home to provide a live, virtual tour to a buyer not physically present.
A “home” means a residential property consisting of not less than one nor more than four residential dwelling units.
If an MLS participant hosts an open house or provides access to a property, on behalf of the seller only, to an unrepresented buyer, will they be required to enter into a written agreement with those buyers touring the home?
No. The new rule will cover every type of relationship where an MLS participant is working with a buyer.
Are written buyer agreements required when listing agents talk with a buyer on behalf of a seller only or as subagents of the seller?
No. If the MLS participant is working only as an agent or subagent of the seller, then the participant is not working for the buyer. In that scenario, an agreement is not required because the participant is performing work for the seller and not the buyer.
Are written buyer agreements required when MLS participants perform ministerial acts?
Yes. The obligation is triggered once the MLS participant is working with that buyer and has taken them to tour a home, regardless of what other acts the MLS participant performs.
But an MLS participant performing only ministerial acts — without the expectation of being paid for those acts and who has not taken the buyer to tour a home — is not working for the buyer.
Are written buyer agreements required in a dual agency scenario, when a single agent works both for the seller and for the buyer?
Yes. If an MLS participant is working as an agent for a buyer, a written agreement is required.
Are written buyer agreements required in a designated agency scenario, when a single broker works both for the seller and for the buyer, and designates an agent to represent the buyer?
Yes. If an MLS participant is working as an agent for a buyer, a written agreement is required.
Think of the monumental change needed in the listing agent’s psyche to get them to stop scolding the buyer-agents and give some respect – but instead they are shorting the commissions too. If you blow off the buyer-agents, then you’re on your own – and the vast majority of agents will have no clue how to find their own buyers.
From the confidential remarks in recent MLS listings:
Buyer did not perform! Seller wants it gone. Seller is going to request your EMD deposit released upon receipt! $25K No games! This home will not go VA, or FHA because of the state of repair. Seller has unfinished work do to other buyers wanting him to stop work because they were buying AS-IS. Sellers are not going to do any repairs. Enter house thought side door do not open front door, BE VERY CAREFUL! Very unsafe! Good luck!
Broker/Agent does not guarantee accuracy of permits, square footage, lot size, zoning, rent control, use codes, schools, and/or other information concerning the condition or features of the property provided by the seller or obtained by public records. Buyer is advised to independently verify the accuracy of all information through personal inspections, the City, and with appropriate professionals.
Please confirm with the listing agent (via text) that the front door is locked properly before leaving property.
Be timely, turn off lights and lock all doors behind you.
Do not contact agent to hold open house or ask to market the property online or through Social Media.
I have tried to be available to everyone for showings and conversations, however I am finished answering questions on what the seller’s want. Thank you for your hard work.
Seller accepted an offer prior to coming to market. There is not a bedroom on the first floor. Please do not request a showing if your clients need a downstairs bedroom. Please do not request to hold open, we hold open houses internally with our team.
NO MORE SHOWINGS OR OFFERS ! MULTIPLE OFFERS RECEIVED!
new double pain windows
Photos along with offer instructions coming soon. Do not contact agent to hold open house or ask to market the property online or through Social Media.
Must provide POF / Lender letter for showing. Only qualified buyers. Listing agent at all showings. No lockbox. Dog on property.
Strictly showing by appointment only.
Only selling 1/2 of the building. No HOA has been formed for the building. 1 bedroom is tenant occupied with lease ending 7/31/24. A/C only in 1 bedroom. Tenant interested in staying.
Home has video cameras inside and out. Seller will be removing Lutron Casseria smart home (switches) and replacing with standard. Security cameras, wine fridge and outside fridge do not convey.
Multiple generous offers already received, all are due by noon, Monday 4/29. You must register your showing using the Sentrilock box or physically attend the open house on Sunday 1 to 4, 4/28. DO NOT USE SHOWING TIME. Touring the property will be a condition of acceptance along with loan cross qualification by (the listing agent’s lender). Please send in your best and highest offer with POFs and loan letter. Offers that do not have all the requirements or are sent to the wrong email, will not be considered. Seller reserves the right to select the best one offer or send out multiple counter offers. Seller to select services.
You’re open? Sure gives the feeling that they plan to work you over on the buyer-side commission.
How about 3%? Oh, you want to negotiate – make it 4% then!
They are only three months into their mega-launch of Homes.com, and CoStar founder and president Andy Florance is already taking victory laps. He is also the #1 cheerleader for buyers going directly to the listing agent, which will be the end result of all the changes underway. Here’s Andy talking in front of a group of realtors:
Florance said Homes.com’s “Your Listing, Your Lead” model was the antidote to agent and consumer frustrations, as evidenced by triple-digit traffic growth during Q3 2023 that gave them a contested lead on Realtor.com as the second-most-trafficked residential portal.
“In the rest of the world, when an agent has a listing, their name is on the listing, their phone number is on the listing, and there’s branding happening,” he said to riotous applause. “Only in the United States is it the portals’ brand goes on the listing rather than the agents’ brand. That’s bizarre.”
Although CoStar didn’t reveal its exact plans for Matterport, Florance did outline a plan to capitalize on digital twinning, a term used to describe hyper-realistic 3D listing experiences.
Florance said digital twinning could enable homebuyers to visualize what their current home furnishings would look like in a new home, play with renovation options for a fixer-upper, or walk with a virtual agent through a virtual listing.
“In residential focus groups, homebuyers are telling us that they prefer listings that offer 3D digital twins so that they can best understand the property,” he said. “Adding virtual reality to Matterport, you can take a virtual tour of the property with your virtual agent who will walk into the space with you.
Florance spent a few moments of the call focusing on buyer-broker commissions and reiterated Homes.com’s potential value when NAR’s settlement terms go into effect this summer. Florance said Homes.com will give buyers an avenue to directly connect with listing agents to view a home, bypassing the potential pressure to sign a representation agreement before they’re ready.
“Currently only 30 percent of buyer agents ever get a written agreement at any point in the transaction process,” he said. “Homes.com connects homebuyers directly with the listing agent, so they can arrange to see the house with no paperwork or commitments.”
“We are increasingly confident in our ability to build out the number one residential marketplace in terms of traffic revenue and profitability in the years ahead,” he added.
CoStar owns LoopNet, the website for commerical listings, as well asten-x.com/which is an online auction house for commercial properties. It won’t be long before they bring auctions to the residential market, will it?
