As a seller, the biggest change is you will no longer have to decide what to offer a buyers agent when signing a listing agreement with your agent.
In the past, as this information was highly visible, Realtors often encouraged sellers to offer the customary compensation since if this wasn't offered, buyers agent's may be less keen to share and show your property with their clients. (In Marin 95% of listings offered 2.5% to the buyers broker). Less awareness leading to a slower and lower sale.
Going forward, sellers may still offer or agree to pay the buyers agent depending upon circumstances, but this will not be set in stone before the property is listed.
So why would you offer to pay this considerable cost if you aren't obliged to? Simply put as a general rule, the more buyers are attracted to a property, the faster it sells and the higher the price. By offering to consider covering a buyers agent's fee, a seller is likely to attract more buyers and sell for a higher price - even net of fees.
There are a myriad of possible scenarios, but lets say as a simple example, you're listing your property for $1M, and there are 2 offers. One at asking price where the buyer is paying their own agent, and another at $1,050,000, but the buyer requests you pay their agent fee of $26,250. Clearly the net is better if you pay the buyer's agent.
Moreover, if you hadn't indicated you were willing to consider paying the buyer's agent's fee, in this scenario there would only have been one offer. As a seller you are in a significantly stronger negotiating position when there is more than one offer.
So absent more unforeseen changes I anticipate my advice to sellers will be to indicate that "Seller is willing to consider buyer concessions" this covering buyer's agent's fees among other things.
As a buyer, the biggest change is that you'll need to commit to an agent earlier in the process and agree what fee they are to be paid.
It seems the trigger for the requirement of a written agreement is likely to be touring a listing with an agent. Before entering a listed property you will need to agree to the terms of a representation agreement.
On the face of it, this seems to unreasonably curtail the interview process, however buyers and agents are likely to adapt to the new rules.
You could interview multiple agents and visit open houses before making a commitment, and I believe interviewing could reasonably be construed as asking many questions - both general and about specific properties - over an extended period of time, so in this way, a buyer might find an agent who's style and experience seems the right fit before visiting any property with them.
For what its worth Zillow appears to be offering a "7 day touring agreement" that purportedly removes the requirement of a written Buyer Broker agreement, but as yet it isn't clear to me how this conforms with the new rules. If it does satisfy requirements (and doesn't put me at risk of censure), you can be sure I will offer it!
Why are these changes being required now
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Regardless of the merits of the lawsuits that triggered these changes (which I discusses in a previous e-mail), the Department of Justice has long been watching over the real estate industry and observing what they believe to be anti competitive practices - remember that earlier in this e-mail I said "Realtors often encouraged sellers to offer the customary compensation...." to buyers agents - well that does sound just a tad uncompetitive doesn't it. So these practice changes have been agree to avoid further lawsuits, but also to head off intervention by the DOJ.
The hope is that now that buyers are required to negotiate their agent's fee there will be innovation in the industry that will benefit the consumer. Certainly there will be a shake up, and there will likely be positive results as well as unintended consequences.
The most likely negative effect will be on first time buyers who, already struggling to get on the property ladder now need to save up their agent's fee as well as a downpayment and other closing costs - or forego representation altogether.
Other outcomes are yet to be determined, but I'll be sure to keep you posted as changes take shape and practices develop. Meanwhile, please feel free to reach out with any questions, or book a quick consult by clicking below.
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