Jim Valentine on Real Estate
Last week we talked about the changes coming to the real estate industry in the area of buyer representation and compensation. We thought it would be good to follow up this week with some specific details from the draft of the new contract that buyers will be signing. It is still being worked on by the form committee, legal counsel and who knows who else, but the gist of these salient issues will surely be there in the end product.
The form is formally titled “Exclusive Buyer Representation Agreement.”
The first line reads “(BUYER) hereby irrevocably grants to (BROKER) … exclusive authorization to assist BUYER with the negotiation and acquisition of real property described below on the following terms and conditions.” The terms include the date the agreement begins and terminates. The property is then described as residential, land or commercial and type, location and requirements of property followed by “…or other property suitable to BUYER.”
The broker’s obligations are then listed which are very much like the “duties owed by a Nevada licensee form” that we’ve used for many years with some changes including: “Brokers agrees to … Assist BUYER in locating a property for purchase, option, and/or lease, and negotiate price, and terms acceptable to BUYER; and Disclose to BUYER each source from which BROKER receives COMPENSATION.”
Buyer’s obligations get interesting as they are committing to pay just as a listing agreement for the sale of a property committed the sellers. If a buyer signs an agreement with more than one agent they are not relieved from paying the other agent if both are bona fide agreements. The agreement provides that “Buyer agrees to provide all relevant personal and financial information needed to assure BUYER’s ability to acquire property described in this agreement or other property satisfactory to the BUYER, consider all properties of the nature described above and to negotiate in good faith to acquire such property if acceptable to BUYER.”
Interesting language for sure.
“Some sellers, such as new home subdivisions and for sale by owners, will not compensate BROKER unless BROKER makes the first visit with BUYER. If BUYER makes a first visit without BROKER, BUYER agrees to compensate BROKER as stated in the COMPENSATION section below.” The amount of the compensation to be paid is negotiated between the buyer and the broker. If the seller is offering compensation to the agent the agent cannot get more in total than what the buyer has agreed to pay in the “Representation Agreement.”
A buyer can make an offer asking the seller to pay a certain amount, but they will not know if the seller is willing to pay that amount until an offer is submitted with that request. I the event they won’t pay the amount agreed between buyer and agent for the agent’s compensation then the buyer will cover off any deficiency. It is only due on the close of escrow unless the buyer defaults on the purchase agreement.
There are many nuances to the agreement, how it will be applied, and how it will be enforced. There will certainly be a learning curve for buyers and agents that will be experienced quickly for we aren’t that far away from every buyer and agent having to put one of these agreements in place before they can see a home, Aug. 17.
Remember, this situation was not conceived and executed by the agents, rather by buyers and lawyers. They wanted the right to negotiate their fee and they now have it, mandated.
Buyers, sellers and agents are all going to have to learn how to adapt to this new system, and we will.
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