Resources & Guides

Listen Up Home Buyers! Required Buyer Broker Agreements

July 9, 2024
Resources & Guides

Listen Up Home Buyers! Required Buyer Broker Agreements

July 9, 2024
Resources & Guides

Listen Up Home Buyers! Required Buyer Broker Agreements

July 9, 2024
Resources & Guides

Listen Up Home Buyers! Required Buyer Broker Agreements

July 9, 2024

Listen Up HomeBuyers! 

On this podcast episode, Andi DeFelice owner and broker of Exclusive Buyer’s Realty in Savannah Georgia

talks with host, Victoria Ray Henderson about changes in the real estate industry. Beginning August 17, 2024, there will be required buyer broker agreements and no offers of buyer agent compensation on the Multiple Listing Service.

Victoria: Thank you for joining us for Listen Up Home Buyers. On this podcast, I have the pleasure of chatting with one of my very good friends, Andi DeFelice, the owner and broker of Exclusive Buyer’s Realty in Savannah, Georgia. Andi, how are you today?

Andi: Hey Victoria. I'm great. How are you?

Victoria: I am good. And I wanted to have you on, to talk about the changes that are going to be happening in real estate starting August 17th, 2024. It's going to be a big change. We're not even sure what will happen. There are some things that we do know will change and I think maybe you could start off, what can we expect August 17th?

Andi:  I think the biggest change that we're going to see as agents is this Settlement Buyer's Agency Commission or a Cooperative Commission will no longer be reflecting in MLS, Zillow or anywhere. So those of us that work as buyer agents previous to this agreement, we could go on MLS and we could see what portion of the commission that had been negotiated with the seller by the listing agent was going to be paid to the buyer's agent. Now, that's a big question. So that's going to make our jobs a little bit harder trying to figure out what our compensation is.

Secondly, before a buyer can go look at a house with a Realtor that they have chosen to work, they're going to have to sign a buyer agency agreement, which will spell out the terms of that relationship. In that agreement, there is a section for that buyer's agent's compensation. So, buyers are going to need to be prepared to have a conversation with the realtor that they choose to work with. Find out how that buyer's agent plans to get compensated for the work that they do, be it from the buyer. Are we going to ask the seller for some sort of concession?It's a big question mark for both buyers and sellers and realtors right now.

Victoria: Yeah. I think for most people in the state of Maryland where I work, and I also work inWashington DC and Virginia, but in Maryland, we've been required to have buyer broker agreements for about six years. I'm used to explaining to people that in order to represent you properly (and I want to get into representation too, just a little bit, People understand what it is but you know), you have to sign this agreement so that I can properly act as your fiduciary. And then, you know, really do the things I need to do to take care of you and advocate for you. The part that's going to be interesting is the compensation, how it's explained on that buyer broker agreement. The problem is that the one that we have now doesn't explain that the compensation for the buyer's agent could come from a variety of places.It's going to be a learning curve for buyers.

Andi:  Well, and I think that's the point, it's still a great big mystery how all this is going to play out, and I think it's going to be as confusing for the seller as it is for the buyer because historically the seller negotiates whatever the commission is with the listing agent.

The listing agent is the one that pays a cooperative commission. The seller doesn't pay a commission to the buyer's agent. The seller pays his agent commission. That agent chooses to or chooses not to cooperate with the buyer's agent.Historically, if you're part of an MLS, it was a cooperative agreement. We all knew that everybody was going to cooperate with everybody else. Now, NAR has taken that away from us. I think the biggest misconception with all of the noise is that this has never been something sellers had a choice in. They've always had a choice. They've never been required to do anything; it’s always been a decision.

Victoria: The weird thing is that there has been so much steady misinformation at this point that you have people parroting a lot of the headlines. I've even seen headlines that say, you know, things like the 6% commission is gone and there's never been any agreed upon. So, with the changes that are coming up August 17th, you know, everybody should know no matter where you are in the country, if you are a buyer and you want to work with a real estate agent, you're going to be signing a buyer broker agreement. And so, the terms of that are exactly how you want them to be. There should be a start date, an end date, a specific amount that buyer's agent is going to be compensated. And it should kind of lay out how that compensation is expected. So that's one big change. And many people inmany states are going to be kind of balking at that,

Andi:  Our relationship with your realtor can vary depending on the type of agency that you have with that realtor. In this case, I mean, we can dig into dual agency a little bit because if you're a buyer…….

Victoria: Yeah. Why don't you break that down so people understand; So, the buyer broker agreement is one thing, and It is going to have a clause in it that says, we can break up in X amount of days. Make sure that your agreement has a proper amount of time, so you're comfortable signing it, but yeah, go into dual agency a little bit.

Andi:  For example, you're working with a Realtor with one of the big box brokerages, for lack of a better way to say it. They have a ton of listings; they have a ton of agents. You got to dial it down and remember that the broker, whoever the broker is over this conglomerate of real estate agents, the broker is the one who has the client.

All the sellers that are assigned with that brokerage belong to that broker. All the buyers that are assigned to that brokerage belong to that broker. So, if you are a buyer and you're working with a buyer's agent that works for one of these big conglomerates, you are going to be asked to agree to dual agency. There's noway they cannot ask you to do that, because there could be a time that you want to look at a house that's listed with that same broker.

That broker already has an agreement and a fiduciary duty to that seller, can have a fiduciary duty to more than one client.

So, you buyer, automatically become that realtor's customer. And there's a tremendous difference in our duties to our clients as opposed to our duties to our customers. We have a strong fiduciary duty to the client. We protect their interest at all costs. They're first and foremost customers. We can take you in a house, we can show you the house, and we can fill out the contracts, but can we give you privileged information about that house? Absolutely not. Can we give you comparable sales about that house? Absolutely not. Can we give you our advice or our guidance about that house as our customer? No, we may not. We just can’t, it's against the rules. So, when you're presented with this buyer agency agreement that you're going to be presented with, regardless of who you're looking with, looking at a house with a realtor, you're going to be asked to sign this agreement, and they ask you to sign to agree to dual agency.Remember that just lessened their responsibility to you

Victoria: I don't know that people really know a lot about representation and what somebody is expected to do to protect your best interests. And I also think that a lot of buyers are going to end up signing dual agency agreements because they're going to go straight to a listing agent and agree to see that listing agent property. And once again, just to kind of recap, you know that listing agent is advocating for the seller's best interest, they're trying to get the best

price, the best terms, all these kinds of details. You have two opposing sides.And then so the buyer comes along and says, “Hey, would you represent me too?”And I just don't think, you know, I think that needs to be really flushed out well before you think about signing any kind of a dual agency agreement.

Andi:  You have to think about it too. When you go visit an open house and you have a buyer's agent sitting that open house, but that buyer's agent works for the listing company. I encourage my clients all the time to go visit them. If they want to go bump around to open houses, go for it, make sure that they tell the agent sitting the open house that they do have representation and that they do have a signed buyer agency agreement. But as a consumer, keep in mind the buyer agent that's sitting in that open house, while they would love for you to buy that house, they're in there to pick up buyers, because that house may not work for you, but if you're in there, youmight want to sign up with that little agent and let her show you other houses and that's why she's there.

Most Realtors don't like giving up a Sunday just sitting around meeting a bunch of people they don’t know, but they can benefit from that by sitting at open houses. 

My company, because we only do exclusive buyer representation of course, but I've been asked by some of my listing agent friends, Hey, would you like for one of your agents to sit at one of my open houses? Because they could pick up some buyers and I am like absolutely not. The perception from the consumer side, if you walk into an open house and there's an agent sitting there, that agent's working for that seller, should know all about the house or at least know they are representing the house. And I don't want there to ever be a perception that one of my agents is representing a house, we don't represent a house, but as a consumer, I think what this is going to force, and I truly hope it happens, I, think it's going to really force consumers to have to get very smart about who they're working with, what that person's goals are, and how they intend to handle this transaction. Yeah. You

Victoria: Yeah, you're going to have to have somebody at some point who's really advocating for you.And, that's what we do

Andi:   Absolutely. Well, if you think about it, I mean, from the day you enter a contract, at least in the state of Georgia, the day you go under contract, we call it the binding agreement. Both parties say, we got a deal, we're moving forward, we're closing. Everything starts from that day, there's a due diligence period or an inspection period and if that expires -You haven't done your inspections, you haven't gone back to the seller with any requested repairs; you just gave up your right to do that. Gone, over, out.

Financing contingencies, Appraisal contingencies, there are all these dates throughout the process that if you are not following and one of them slips, you not only won't get the house that you're trying to buy, but you also run a huge risk of losing your earnest money. 

And right now, earnest money in my market is at least 1% of the purchase price, if not 2 or 3% of the purchase price, well, that could be tens of thousands of dollars, and you legally would have to forfeit that money. The seller knows that they can keep it. Yeah. So if you don't have somebody in your corner following these transactions and making sure all these dates are being followed, then your money's at risk. And it's not the agent's fault if you lose it, but in my opinion, it is the agent's responsibility to make sure, I mean, there's a lot of caveat import in our contracts; Buyer beware, especially in the state of Georgia, the legal powers that be in Georgia have written our contracts. So, if our client misses a date,they can't come back on us. I hate that about our contracts, because that's our responsibility. I want to make sure that our clients know exactly what's expected and when it's expected, and what to do if you're not going to be able to fulfill that expectation.

Victoria: And certainly, there is an art to negotiation. There's an art to communicating effectively so that as you're negotiating on repairs, you know, very often you don't want tobe insulting if the person has been living in this particular home for a longtime and they think that their handyman repairs are fine. And here you are saying, oh, not really. I mean, there's really some things in ways that you have to, again, come down to communication, but to communicate effectively so that you protect your buyer's interests and you do it without insulting the listing agent or the seller.

I just had a transaction that was settled. I don't love this, but there were lots of things in the house the woman was downsizing and she said, oh, and let's talk about maybe having your clients, if they're interested, they can buy some of this. And so, then you have to figure out all of that and how is that going to work? And is it free or is it paid? And, you know, you have to make sure that you have everything, especially if your client's paying for it. I mean, these are the kinds of little layers of things that, and that's even what I call the fun stuff. That's not even when it really gets sticky and things go sideways if things start to kind of fall apart and who comes to your rescue to put it back together again.

Andi:  That's the whole point. And that's the thing.It's so stressful, even though it's exciting and it's fun and it's wonderful, it's still stressful. So, you've got your lender in your ear asking for all of these documents that you've already given them 99% of the time, or it doesn't make any sense why they're asking for it. And you've also got to figure out what you're going to do about where you're coming from, how you're going to get in the house, where's everything going to fit? There are so many different stressors. Our role, in my opinion, is to be the calming force in all of that, and really be able to say to them, this is going to be okay, we may be in the background scrambling to make sure that what we're saying is true.

Victoria: For sure.

Andi:  That's our role. And it's the agent on the other side's role as well. Like I said at the beginning of this, my goal for every transaction I have, and in the state of Georgia, the buyers and sellers come together at the closing table, which is lovely because they're able to share stories and talk about the neighbors in the new house.

Victoria:  Yeah, we don't do that.

Andy: Yeah. It's great if it's been a pleasant transaction. And I think that makes us buyer’s agents and listing agents work hard because we know we're going to be sitting across the table from each other at the end of the day. So, let's keep this pleasant, let's keep it moving forward. Let's keep our clients' best interests front and foremost and do our jobs correctly. So, I think, in my mind, to recap as a consumer, think about the questions that you want good answers from the agent that you're interviewing and don't just take the first agent that your sister's best friend's husband used when they bought their house.

Sit down and have a conversation. Ask them how many deals they've had fall apart and why that happened, ask them what they do when things start to get a little tense between the seller and the buyer. Think about the way that you want the end result to be. Your agent interview questions should guide your agent as to where you want to end up.

Victoria: Well, Andi DeFelice, the owner and broker of Exclusive Buyer Realty in Savannah, Georgia.Thank you so much for joining me on Listen to Home Buyers. It's been a real pleasure.

 Victoria Ray Henderson is the owner and broker of HomeBuyer Brokerage and host of the podcast, Listen Up Home Buyers! 

Listen Up HomeBuyers! On this podcast episode, Andi DeFelice owner and broker of Required Buyer Broker Agreement

 

 

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Listen Up Home Buyers! Required Buyer Broker Agreements

Listen Up Home Buyers! Required Buyer Broker Agreements
Listen Up Home Buyers! Required Buyer Broker Agreements
Listen Up Home Buyers! Required Buyer Broker Agreements
Listen Up Home Buyers! Required Buyer Broker Agreements

Listen Up HomeBuyers! 

On this podcast episode, Andi DeFelice owner and broker of Exclusive Buyer’s Realty in Savannah Georgia

talks with host, Victoria Ray Henderson about changes in the real estate industry. Beginning August 17, 2024, there will be required buyer broker agreements and no offers of buyer agent compensation on the Multiple Listing Service.

Victoria: Thank you for joining us for Listen Up Home Buyers. On this podcast, I have the pleasure of chatting with one of my very good friends, Andi DeFelice, the owner and broker of Exclusive Buyer’s Realty in Savannah, Georgia. Andi, how are you today?

Andi: Hey Victoria. I'm great. How are you?

Victoria: I am good. And I wanted to have you on, to talk about the changes that are going to be happening in real estate starting August 17th, 2024. It's going to be a big change. We're not even sure what will happen. There are some things that we do know will change and I think maybe you could start off, what can we expect August 17th?

Andi:  I think the biggest change that we're going to see as agents is this Settlement Buyer's Agency Commission or a Cooperative Commission will no longer be reflecting in MLS, Zillow or anywhere. So those of us that work as buyer agents previous to this agreement, we could go on MLS and we could see what portion of the commission that had been negotiated with the seller by the listing agent was going to be paid to the buyer's agent. Now, that's a big question. So that's going to make our jobs a little bit harder trying to figure out what our compensation is.

Secondly, before a buyer can go look at a house with a Realtor that they have chosen to work, they're going to have to sign a buyer agency agreement, which will spell out the terms of that relationship. In that agreement, there is a section for that buyer's agent's compensation. So, buyers are going to need to be prepared to have a conversation with the realtor that they choose to work with. Find out how that buyer's agent plans to get compensated for the work that they do, be it from the buyer. Are we going to ask the seller for some sort of concession?It's a big question mark for both buyers and sellers and realtors right now.

Victoria: Yeah. I think for most people in the state of Maryland where I work, and I also work inWashington DC and Virginia, but in Maryland, we've been required to have buyer broker agreements for about six years. I'm used to explaining to people that in order to represent you properly (and I want to get into representation too, just a little bit, People understand what it is but you know), you have to sign this agreement so that I can properly act as your fiduciary. And then, you know, really do the things I need to do to take care of you and advocate for you. The part that's going to be interesting is the compensation, how it's explained on that buyer broker agreement. The problem is that the one that we have now doesn't explain that the compensation for the buyer's agent could come from a variety of places.It's going to be a learning curve for buyers.

Andi:  Well, and I think that's the point, it's still a great big mystery how all this is going to play out, and I think it's going to be as confusing for the seller as it is for the buyer because historically the seller negotiates whatever the commission is with the listing agent.

The listing agent is the one that pays a cooperative commission. The seller doesn't pay a commission to the buyer's agent. The seller pays his agent commission. That agent chooses to or chooses not to cooperate with the buyer's agent.Historically, if you're part of an MLS, it was a cooperative agreement. We all knew that everybody was going to cooperate with everybody else. Now, NAR has taken that away from us. I think the biggest misconception with all of the noise is that this has never been something sellers had a choice in. They've always had a choice. They've never been required to do anything; it’s always been a decision.

Victoria: The weird thing is that there has been so much steady misinformation at this point that you have people parroting a lot of the headlines. I've even seen headlines that say, you know, things like the 6% commission is gone and there's never been any agreed upon. So, with the changes that are coming up August 17th, you know, everybody should know no matter where you are in the country, if you are a buyer and you want to work with a real estate agent, you're going to be signing a buyer broker agreement. And so, the terms of that are exactly how you want them to be. There should be a start date, an end date, a specific amount that buyer's agent is going to be compensated. And it should kind of lay out how that compensation is expected. So that's one big change. And many people inmany states are going to be kind of balking at that,

Andi:  Our relationship with your realtor can vary depending on the type of agency that you have with that realtor. In this case, I mean, we can dig into dual agency a little bit because if you're a buyer…….

Victoria: Yeah. Why don't you break that down so people understand; So, the buyer broker agreement is one thing, and It is going to have a clause in it that says, we can break up in X amount of days. Make sure that your agreement has a proper amount of time, so you're comfortable signing it, but yeah, go into dual agency a little bit.

Andi:  For example, you're working with a Realtor with one of the big box brokerages, for lack of a better way to say it. They have a ton of listings; they have a ton of agents. You got to dial it down and remember that the broker, whoever the broker is over this conglomerate of real estate agents, the broker is the one who has the client.

All the sellers that are assigned with that brokerage belong to that broker. All the buyers that are assigned to that brokerage belong to that broker. So, if you are a buyer and you're working with a buyer's agent that works for one of these big conglomerates, you are going to be asked to agree to dual agency. There's noway they cannot ask you to do that, because there could be a time that you want to look at a house that's listed with that same broker.

That broker already has an agreement and a fiduciary duty to that seller, can have a fiduciary duty to more than one client.

So, you buyer, automatically become that realtor's customer. And there's a tremendous difference in our duties to our clients as opposed to our duties to our customers. We have a strong fiduciary duty to the client. We protect their interest at all costs. They're first and foremost customers. We can take you in a house, we can show you the house, and we can fill out the contracts, but can we give you privileged information about that house? Absolutely not. Can we give you comparable sales about that house? Absolutely not. Can we give you our advice or our guidance about that house as our customer? No, we may not. We just can’t, it's against the rules. So, when you're presented with this buyer agency agreement that you're going to be presented with, regardless of who you're looking with, looking at a house with a realtor, you're going to be asked to sign this agreement, and they ask you to sign to agree to dual agency.Remember that just lessened their responsibility to you

Victoria: I don't know that people really know a lot about representation and what somebody is expected to do to protect your best interests. And I also think that a lot of buyers are going to end up signing dual agency agreements because they're going to go straight to a listing agent and agree to see that listing agent property. And once again, just to kind of recap, you know that listing agent is advocating for the seller's best interest, they're trying to get the best

price, the best terms, all these kinds of details. You have two opposing sides.And then so the buyer comes along and says, “Hey, would you represent me too?”And I just don't think, you know, I think that needs to be really flushed out well before you think about signing any kind of a dual agency agreement.

Andi:  You have to think about it too. When you go visit an open house and you have a buyer's agent sitting that open house, but that buyer's agent works for the listing company. I encourage my clients all the time to go visit them. If they want to go bump around to open houses, go for it, make sure that they tell the agent sitting the open house that they do have representation and that they do have a signed buyer agency agreement. But as a consumer, keep in mind the buyer agent that's sitting in that open house, while they would love for you to buy that house, they're in there to pick up buyers, because that house may not work for you, but if you're in there, youmight want to sign up with that little agent and let her show you other houses and that's why she's there.

Most Realtors don't like giving up a Sunday just sitting around meeting a bunch of people they don’t know, but they can benefit from that by sitting at open houses. 

My company, because we only do exclusive buyer representation of course, but I've been asked by some of my listing agent friends, Hey, would you like for one of your agents to sit at one of my open houses? Because they could pick up some buyers and I am like absolutely not. The perception from the consumer side, if you walk into an open house and there's an agent sitting there, that agent's working for that seller, should know all about the house or at least know they are representing the house. And I don't want there to ever be a perception that one of my agents is representing a house, we don't represent a house, but as a consumer, I think what this is going to force, and I truly hope it happens, I, think it's going to really force consumers to have to get very smart about who they're working with, what that person's goals are, and how they intend to handle this transaction. Yeah. You

Victoria: Yeah, you're going to have to have somebody at some point who's really advocating for you.And, that's what we do

Andi:   Absolutely. Well, if you think about it, I mean, from the day you enter a contract, at least in the state of Georgia, the day you go under contract, we call it the binding agreement. Both parties say, we got a deal, we're moving forward, we're closing. Everything starts from that day, there's a due diligence period or an inspection period and if that expires -You haven't done your inspections, you haven't gone back to the seller with any requested repairs; you just gave up your right to do that. Gone, over, out.

Financing contingencies, Appraisal contingencies, there are all these dates throughout the process that if you are not following and one of them slips, you not only won't get the house that you're trying to buy, but you also run a huge risk of losing your earnest money. 

And right now, earnest money in my market is at least 1% of the purchase price, if not 2 or 3% of the purchase price, well, that could be tens of thousands of dollars, and you legally would have to forfeit that money. The seller knows that they can keep it. Yeah. So if you don't have somebody in your corner following these transactions and making sure all these dates are being followed, then your money's at risk. And it's not the agent's fault if you lose it, but in my opinion, it is the agent's responsibility to make sure, I mean, there's a lot of caveat import in our contracts; Buyer beware, especially in the state of Georgia, the legal powers that be in Georgia have written our contracts. So, if our client misses a date,they can't come back on us. I hate that about our contracts, because that's our responsibility. I want to make sure that our clients know exactly what's expected and when it's expected, and what to do if you're not going to be able to fulfill that expectation.

Victoria: And certainly, there is an art to negotiation. There's an art to communicating effectively so that as you're negotiating on repairs, you know, very often you don't want tobe insulting if the person has been living in this particular home for a longtime and they think that their handyman repairs are fine. And here you are saying, oh, not really. I mean, there's really some things in ways that you have to, again, come down to communication, but to communicate effectively so that you protect your buyer's interests and you do it without insulting the listing agent or the seller.

I just had a transaction that was settled. I don't love this, but there were lots of things in the house the woman was downsizing and she said, oh, and let's talk about maybe having your clients, if they're interested, they can buy some of this. And so, then you have to figure out all of that and how is that going to work? And is it free or is it paid? And, you know, you have to make sure that you have everything, especially if your client's paying for it. I mean, these are the kinds of little layers of things that, and that's even what I call the fun stuff. That's not even when it really gets sticky and things go sideways if things start to kind of fall apart and who comes to your rescue to put it back together again.

Andi:  That's the whole point. And that's the thing.It's so stressful, even though it's exciting and it's fun and it's wonderful, it's still stressful. So, you've got your lender in your ear asking for all of these documents that you've already given them 99% of the time, or it doesn't make any sense why they're asking for it. And you've also got to figure out what you're going to do about where you're coming from, how you're going to get in the house, where's everything going to fit? There are so many different stressors. Our role, in my opinion, is to be the calming force in all of that, and really be able to say to them, this is going to be okay, we may be in the background scrambling to make sure that what we're saying is true.

Victoria: For sure.

Andi:  That's our role. And it's the agent on the other side's role as well. Like I said at the beginning of this, my goal for every transaction I have, and in the state of Georgia, the buyers and sellers come together at the closing table, which is lovely because they're able to share stories and talk about the neighbors in the new house.

Victoria:  Yeah, we don't do that.

Andy: Yeah. It's great if it's been a pleasant transaction. And I think that makes us buyer’s agents and listing agents work hard because we know we're going to be sitting across the table from each other at the end of the day. So, let's keep this pleasant, let's keep it moving forward. Let's keep our clients' best interests front and foremost and do our jobs correctly. So, I think, in my mind, to recap as a consumer, think about the questions that you want good answers from the agent that you're interviewing and don't just take the first agent that your sister's best friend's husband used when they bought their house.

Sit down and have a conversation. Ask them how many deals they've had fall apart and why that happened, ask them what they do when things start to get a little tense between the seller and the buyer. Think about the way that you want the end result to be. Your agent interview questions should guide your agent as to where you want to end up.

Victoria: Well, Andi DeFelice, the owner and broker of Exclusive Buyer Realty in Savannah, Georgia.Thank you so much for joining me on Listen to Home Buyers. It's been a real pleasure.

 Victoria Ray Henderson is the owner and broker of HomeBuyer Brokerage and host of the podcast, Listen Up Home Buyers! 

Listen Up HomeBuyers! On this podcast episode, Andi DeFelice owner and broker of Required Buyer Broker Agreement

 

 

You may download the PDF by clicking here.
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