Jim Valentine on Real Estate
If you’ve an interest in real estate you surely know that there is a fundamental change in how the business will be conducted coming in the near future, i.e.- on, or before, Aug. 17.
We’ve held off writing about it until now because the rumor mill and media inflamers were going full blast with little or no actual knowledge. Even now there are a lot of unanswered questions, but things are beginning to shape up.
So here goes: Beginning no later than Aug. 17, Realtors must sign a contract with buyers before they show them a property. The form is called a Buyers Brokerage Agreement, or something similar depending on your form provider.
It is in essence a listing agreement for buyers. Just like agents list seller’s property for sale, agents will now list buyers. The contract will provide for the buyer to work with the agent and to pay the agent an agreed/contracted fee when the transaction is completed.
This is a big change from the historic practice of sellers offering a compensation amount to the agent that sold their house. There would be a negotiated fee, i.e.- 5%, paid and both listing and selling broker received half of the fee, 2.5% each.
There is a Nevada state required form, Duties Owed By A Nevada Real Estate Licensee, that was to be signed “as soon as practicable” when an agent started working with a buyer. It did not create an agency relationship, but it did describe agency and duties of the agent.
A Buyer’s Broker Agreement does establish an agency relationship as it is a contract formalizing such a relationship. The mechanics are still being worked out as there are many unintended consequences.
This change wasn’t suddenly decided on by the National Association of Realtors to improve the industry, rather it is the result of a class action suit and a negotiated settlement thereof.
It was intended to be helpful to buyers, but from a professional standpoint, it is going to create a lot of havoc for a while and isn’t as favorable to buyers as the media would have you believe. One initial example is the VA buyer.
They were prohibited from being able to pay commissions. That meant that a zero down payment VA buyer would have to come up with 2.5%, or whatever amount they negotiated with their agent, to pay the commission the contracted to pay with the buyer’s broker agreement that had to be signed before they saw a house.
Instead of it being part of their purchase price and thus part of their loan and financed over 30 years, they’d have to come up with $10,000 to buy a $400,000 house, plus their closing and loan costs.
The VA recently made a policy change, but that is one example of how things are being forced to change because of these changes. Embrace the change, both buyers and agents. The old way is going to be history so we might as well all get ready for a new method of doing business.
Fortunately, the real estate industry in Northern Nevada has always maintained a very high standard of practice so we are confident that this change will be smoothly implemented with agents explaining to buyers so they understand exactly what they are agreeing to, where the money is flowing, and what services they can expect.
This will be embraced by competent agents that can properly explain their worth. We all know that a good professional agent is valuable. You will want a good agent that can negotiate their worth with you to negotiate on your behalf when it comes to spending your money, the money you are paying to buy your property.
Going cheap thinking you got a deal can actually cost you tens of thousands of dollars. Pay attention, the game changed, and you must make good decisions.
The next few months will be interesting times as we go forward together and figure out a good way to do our business for the protection of all.
When it comes to choosing professionals to assist you with your Real Estate needs… Experience is Priceless! Jim Valentine, RE/MAX Gold Carson Valley, License BS.03481 775-781-3704. dpwtigers@hotmail.com