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How Real Estate Commission Changes Will Affect Homebuyers in 2024

A significant federal ruling will set real estate commission changes to homebuying in 2024, potentially leaving homebuyers unrepresented or paying more for their homes. These changes, driven by a federal lawsuit, are critical to understand for buyers, sellers, and buyer’s agents.

Section 1: Background on Real Estate Commission Changes

In the past, buying real estate was simpler and involved representation without additional commissions on the buyer’s side. However, a federal lawsuit in October 2023 mandated changes to how agents are paid. This verdict introduced confusion about who will pay for what, necessitating new practices for homebuyers and sellers.

Section 2: New Compensation Structures

Starting in August 2024, sellers will no longer pay both the listing and buyer’s agents. Instead, listing and buyer-brokerage compensations will be separate. Buyer’s agents can be compensated in three ways:

  • The listing broker offers part of their commission.
  • Sellers provide compensation as a concession.
  • Buyers pay the agent directly.

Another significant change is the removal of the Buyer’s Agent commission visibility on MLS, impacting how agents know they will be compensated.

Section 3: Impact on Buyers

These real estate commission changes mean buyers will need to sign a Buyer Representation Agreement before an agent begins working for them, confirming their responsibility for compensation if not covered by the seller or listing agent. This could lead to questions about the necessity of having an agent.

As a buyer watching this, you may be thinking “I don’t want to pay commission”. And, you may be wondering “well do I even need an agent to buy a home?” And, the answer to that is no. Much like the question “do I need a cage to swim with sharks?” No, you definitely don’t need a cage to swim with sharks. Is it advisable to have a cage? Definitely yes.

Section 4: Risks of Self-Representation

Choosing to go without an agent can lead to various pitfalls:

  • Misestimating the home’s value.
  • Misunderstanding sale terms and contingencies.
  • Facing potential financial loss due to lack of expert guidance.

For example, mismanaging an appraisal contingency can result in significant financial loss if the property appraises lower than the sale price, causing issues with the lender.

Section 5: Value of a Buyer’s Agent

See, a buyer’s agent provides way more value than simply opening homes for you to walk through and tour. Here is a quick list of typical services we provide our buyers:

  • searching both on and off-market properties on your behalf. In fact, off-market homes would simply be unavailable to unrepresented buyers and that makes up about 20% of Los Angeles home sales!
  • preliminary due diligence on any home you’re interested in. They sus out any potential issues and bring them to your attention before you ever step foot in a home.
  • preparing contracts and offers for buyers.
  • preparing buyers files with all required documents for a smooth offer process
  • valuing prospective homes and negotiating the price and terms in your favor
  • guiding buyers through the escrow process and protecting your earnest money
  • scheduling trusted appraisers, inspectors, and specialists during escrow
  • negotiating contingencies and managing them through escrow
  • contract guidance and recommendations

And a host of other services that both protect you and save you lots of time and money throughout your buying process. Simply said, good agents provide tremendous value to their clients as they help you navigate one of the largest purchases you will make.

Conclusion

Wise sellers will still offer adequate commissions to listing agents, ensuring buyer’s agents are compensated. As these real estate commission changes take effect, it’s essential to stay informed and prepared. For any questions, click here for more information.

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