Six months ago I wrote this piece explaining what the new (to most of us) Buyer Representation Agreement looked like. Being that we’re now, well, six months into the post-NAR settlement world, it seems a good time to check in and see what has changed in practice.
Before tackling that, I’ll go with ever-popular bullet points to recap what actually has legally changed. A few things:
- The common practice regarding commissions for buyer agents prior to last August was this: the seller decided how much they would give to a buyer agent who brings a buyer for their house, and this amount (typically a percentage) was advertised in the Multiple Listing Service so all agents could see it.
- As of last August, MLS’s that affiliate with the National Association of Realtors (like mine and hundreds of others) were no longer allowed to display what, if any, commission the seller was offering to a buyer’s agent that brought a buyer for their house.
- Also as of last August, NAR began requiring all buyer agents to sign representation agreements with their clients prior to any major real estating (like showing houses). This regulation became Oregon law on January 1 of this year. The agreement outlines what compensation the buyer would guarantee their agent.
So what have these changes brought to the actual process? Not much. Buyers have approached these representation agreements with some trepidation, which is a totally natural reaction. Most buyers who had bought in the past were not asked to sign these and never really thought much about how their agent was compensated– they just knew that it came from the seller’s proceeds. First-time buyers often don’t know how any of it works. Now they’re being asked to sign a document that guarantees that they will pay their agent if the seller doesn’t. That’s not nothing.
In reality, there just haven’t been many cases where the seller isn’t covering all or most of the buyer agent’s fee. I haven’t seen one yet where it was even in question. Oregon’s standard purchase agreement includes a section to outline this and while that number in line 97 can be zero, I haven’t seen one yet:
Sellers and their agents are having a different kind of conversation regarding this topic. Previously, they would decide on a commission for their listing agent and a commission for the buyer’s agent, and both of those numbers would be included in their listing agreement. As said before, the buyer side commission would then get advertised in the MLS. Now, there’s only one line in the listing agreement, for the listing agent’s commission. Listing agents are counseling their sellers that any offer they see will likely have a request for contributions (see above), and they can judge those offers accordingly.
If you’re wondering why adherence to the old model is sticking, it comes down to the financial realities facing buyers. Many of them are stretching every last penny to buy a house, and having to come up with a down payment, closing costs, AND a payment for their agent may be too much. It’s easier to continue with a system in which the buyer agent fee is baked into the price of the house. Sellers then are incentivized to maintain the status quo since forcing buyers to come up with these funds will limit their buyer pool.
One other thing hasn’t changed: buyers are still in complete control over how much they are willing to pay, and sellers are in complete control of what they’re willing to accept. The buyer agreement, which does outline what compensation the buyer is guaranteeing their agent will receive, does not contain the element of a closing table surprise. The buyer will include the request for contributions in the offer. If the seller doesn’t accept that, there’s no contract. It’s just another point of negotiation.
This is what it looks like in a market that may skew toward sellers, but is relatively balanced. If it were a viciously strong sellers market like it was a few years ago, we’d probably be seeing reluctance among sellers to cover these costs. If it were a strong buyers market, sellers would be bending over backwards to entice buyers. Like everything else, it just comes down to the bottom line
