In March 2024, the National Association of REALTORS® settled a class action lawsuit centered around real estate commissions. As part of this settlement, the use of Buyer Brokerage Agreements became mandatory. Here’s what you need to know about these agreements:
Mandatory Buyer Brokerage Agreement Requirements:
- Written Agreements Before Tours: Agents working with buyers must enter into written agreements with their clients before touring a home. This ensures both parties are clear on their roles and responsibilities.
- Clear Compensation Disclosure: The agreement must specify the compensation amount or rate the buyer’s agent will receive and how this amount will be determined from any source. This is where the buyer and their agent agree on the agent’s compensation for their services.
- Objective and Fixed Compensation: The compensation must be an exact amount, either a fixed price or a set percentage. Vague terms like “up to” a certain percentage or amount are not permissible.
- Prohibition on Excess Compensation: The agreement must include a provision that prohibits the buyer’s agent from receiving compensation for brokerage services from any party that exceeds the agreed amount or rate. If an opportunity to earn more arises, the buyer and agent must mutually agree to amend the original agreement.
- Negotiability of Broker Fees: A conspicuous statement must be included stating that broker fees and commissions are not set by law and are fully negotiable. This has always been the case, but now it’s a requirement to ensure transparency and control over the process.
What Does This Mean for You as a Buyer?
For those who have purchased a home in the past, this new practice may require some adjustment. Previously, you might not have had to sign anything committing yourself to one agent or had discussions about how your agent would be compensated.
However, this new practice is a positive change. It ensures transparency in the compensation conversation, fostering a more open and fair transaction process. Think of the new Buyer Brokerage Agreement as an employment contract between you and your agent. Just like when you list a house for sale, a listing agreement is signed, and the fee for services is negotiated, now, as a buyer, you will have clarity on what to expect from your agent and how their compensation works.
This change brings an extra layer of information and control, making your home-buying experience more transparent and fair.
Read more about How Real Estate Agents Get Paid.
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