You’ve probably read the headlines...
‘𝗥𝗲𝗮𝗹𝘁𝗼𝗿𝘀 𝗦𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁 𝘁𝗼 𝗟𝗼𝘄𝗲𝗿 𝗛𝗼𝗺𝗲 𝗦𝗮𝗹𝗲 𝗖𝗼𝘀𝘁,’ ‘𝗡𝗮𝘁𝗶𝗼𝗻𝗮𝗹 𝗔𝘀𝘀𝗼𝗰𝗶𝗮𝘁𝗶𝗼𝗻 𝗼𝗳 𝗥𝗲𝗮𝗹𝘁𝗼𝗿𝘀 𝗔𝗴𝗿𝗲𝗲𝘀 𝘁𝗼 𝗦𝗹𝗮𝘀𝗵 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻𝘀 𝘁𝗼 𝗦𝗲𝘁𝘁𝗹𝗲 𝗟𝗮𝘄𝘀𝘂𝗶𝘁𝘀,’ ‘𝗧𝗵𝗲 𝟲% 𝗖𝗼𝗺𝗺𝗶𝘀𝘀𝗶𝗼𝗻 𝗼𝗻 𝗕𝘂𝘆𝗶𝗻𝗴 𝗢𝗿 𝗦𝗲𝗹𝗹𝗶𝗻𝗴 𝗔 𝗛𝗼𝗺𝗲 𝗜𝘀 𝗚𝗼𝗻𝗲 𝗔𝗳𝘁𝗲𝗿 𝗥𝗲𝗮𝗹𝘁𝗼𝗿𝘀 𝗔𝗴𝗿𝗲𝗲 𝘁𝗼 𝗦𝗲𝗶𝘀𝗺𝗶𝗰 𝗦𝗲𝘁𝘁𝗹𝗲𝗺𝗲𝗻𝘁,’ and more…
But, what does this all mean? And, does it impact Spokane home sales in unique ways? Below I outline the basic changes National Association of Realtors (NAR) settlement with a focus on buyer representation, then I’ll discuss what this means for buyers and sellers in Spokane, WA and the local market.
The Role of Buyer’s Agents in the Home-Buying Process
Let’s start with some real estate basics. Buyer’s agents have long been a cornerstone of the home-buying process, offering invaluable guidance and expertise. From finding the right property to negotiating offers and navigating the complexities of real estate contracts, buyer’s agents ensure that your interests are well-represented throughout the transaction. This level of support has traditionally been available to buyers through buyer agent compensation that was negotiated by the listing agent and often shared equally between the listing broker and buyer broker. It will no longer be a unilateral offer of compensation and this is at the heart of what changes on August 17th.
What to Expect on August 17 When the NAR Settlement Changes Take Effect
Starting August 17, 2024, the way buyer’s agents are compensated will change significantly. Currently, the compensation offered to a buyer's broker is typically included in the property’s listing on the Multiple Listing Service (MLS). This compensation is generally paid by the seller as part of the transaction, meaning buyers don’t have to pay their agent directly out of pocket. Sellers now have control over whether a compensation is offered to buyers agent and how much that compensation offering will be.
As a note, the NAR continues to say that compensation has always been negotiable, but there were rules in place previously that required at least $1 of compensation to be offered, there was never an option to offer $0 to the buyer's broker, and many brokerages had a ‘standard’ offer of compensation.
Starting August 17th, 2024, these are three key changes:
- Mandatory Buyer Representation Agreements: Realtors must now secure written agreements from buyers before showing properties, ensuring a formalized relationship and clear financial and service expectations. This is true to show a bunch of houses or even just one.
- MLS Compensation Field Removal: The MLS will no longer display the compensation offered to buyer's agents in MOST cases, prompting more direct communication between agents and clients regarding commission fees for both buyers and sellers.
- Potential Shift in Buyer Costs: Buyer agent's fees will be paid a variety of ways. They can be paid directly by the buyer, as sellers may choose not to cover these costs, or sellers CAN still pay a buyer’s agent fees in a myriad of ways. I’ll discuss this more below when talking about buyer concessions.
The aim of these changes is to give sellers and buyers in particular, more transparency regarding the costs associated with their representation.
Understanding Buyer Representation Agreements
A buyer representation agreement is a contract between a buyer and their real estate agent that formalizes their working relationship. In this agreement, the agent’s responsibilities, the duration of their services, and the compensation they will receive are clearly defined. Signing a buyer representation agreement upfront means buyers will now have a clearer understanding of what they are paying for when they hire an agent, but it also introduces new considerations.
For instance, while buyers may not necessarily have to pay their agent out of pocket, they will have to negotiate how the agent’s compensation will be covered. Some buyers might request that the seller credit them at the close of escrow to cover these fees. Alternatively, the seller might agree to pay the buyer’s broker directly as part of the transaction. These negotiations will become a more integral part of the home-buying process. And, the ability of your agent to help guide your negotiations will be key.
Question: Will Buyer Representation Agreements Change for Behler Homes?
As a realtor who has always focused on transparent agreements with my clients, there is very little variance between my previous buyer representation agreement process and this new one. Previously, I presented and discussed the agreement along with my fee with a new buyer client, and had them sign it at the time of writing an offer. Now, the agreement must be signed prior to viewing any homes. The agreement allows for a non-exclusive arrangement, or an exclusive arrangement for a duration of one day, or more depending on what is works best for the client. The duration could also be specified for one particular home. There is flexibility to create the agreement that works best for what the buyers needs are. This small shift in timeline will not create a significant issue for myself or my clients and I welcome the transparency and opportunity to be your choice for Spokane home purchases.
I'm always going to be excited to sell homes in the best, big, little city!
The Impact Spokane Home Buyers
If you're planning to purchase a home in Spokane, it’s essential to understand your options under this new system. If you’re in the process of interviewing agents, be sure to ask about how they handle buyer representation agreements and what compensation structures they offer. These changes will not prevent you from seeing properties or making offers, but they will impact how you work with your agent. Whether you negotiate compensation with the seller or choose to pay your agent directly, understanding these options will empower you to make the best decision for your situation.
It could be temping to find a home you like, go to the listing agent and either have the listing agent represent you, or go completely unrepresented. And, technically this is possible. But, eek! Please don’t do this. In my opinion, the new settlement changes actually elevate the importance of a buyer’s agent. It is important to understand as a buyer that dual agency (where buyer and seller are represented by the same broker) or no buyer representation results in a reduced level of support and potentially a transaction where your needs are not being represented. For buyers, I highly recommend researching and finding an experienced, transparent agent who embraces these new changes and is committed to your interests.
The Impact on Spokane Home Sellers
Though the changes are more focused on the buyer’s process, sellers in Spokane will also need to adjust to the new landscape. Traditionally, sellers have had the ability to offer compensation to the buyer’s broker through the MLS. With the recent changes, this will no longer be a unilateral decision displayed in the MLS, but rather a point of negotiation in each transaction.
Sellers will now have more control over how and to whom they offer compensation. This could potentially lead to more strategic negotiations where the seller and their agent decide the best way to attract buyers while maximizing the seller’s net proceeds. Sellers should be prepared to discuss these options with their listing agent and to understand the implications of offering or not offering compensation to buyer brokers. Buyer concessions, agreements in real estate where the seller covers some of the buyer's closing costs or other expenses associated with purchasing the property, will become a key part of the negotiation process.
There are four main times of concessions:
- Seller credits to the buyer at closing to satisfy buyers contractual agreement with buyers broker
- An amount credited to the buyer at closing to cover all or some portion of the buyers closing costs (points, rate buy down, etc.)
- An amount credited at closing to cover replacement of flooring, appliances, roof, etc.
- An amount credited at closing to cover a service such as a home warranty
Again, I’m going to advocate for hiring an educated and dedicated agent. Great agents have been adapting to the changes and adopting new business practices since the beginning of 2024. We are prepared navigate these conversations with transparency and openness and ensure our clients feel confident moving forward in their partnership and are prepared for the new negotiations in this new real estate landscape. For sellers, these new laws highlight the importance of having a skilled real estate agent who has thoughtful negotiation skills and is up to speed on the current market. It never was a good idea to casually choose a listing agent, but now it’s even more important to do your research.
Quality Real Estate Agents (and their clients!) will Flourish
The Spokane real estate market, like many others across the country, is in the midst of significant changes. But, this will not completely disrupt the Spokane real estate market. In Spokane, it hasn’t been entirely uncommon to require a buyer broker services agreement prior to rendering real estate services. In many other markets, it was entirely un-utilized, so it will be a bigger shock in some cities and states vs Spokane, WA. Hiring a real estate agent who is staying informed about these changes and how the changes impact your buying or selling strategy is more important than ever.
As you navigate this evolving market, remember that your real estate agent is a valuable resource. It is more important than ever for buyers and sellers reflect on their choice of agent instead of jumping into the process with someone random. Realtors who are not creating value and providing quality representation for their clients will continue to flourish in this new environment.
Related: Frequently Asked Questions about the Spokane Real Estate Market
Related: Spokane Relocation Guide from a Local
If you're in need of an experienced, local real estate agent or just want to talk shop about the NAR Settlement changes, take a look at my listings here or reach out to me.
