Avoid additional costs with your buyer's agent

The real estate landscape is shifting, with new practices like mandatory buyer's agreements becoming the norm. While these agreements aim to provide clarity and protection, they can also create unexpected complications.

Imagine signing a buyer's agreement with an agent, then stumbling upon your dream home during a casual open house visit. This seemingly innocent scenario could lead to a costly mistake, potentially leaving you on the hook for thousands of dollars in out-of-pocket fees.

As the industry evolves, it's crucial for homebuyers to understand the implications of these agreements and the potential pitfalls of going solo after signing one.

Contacting Listing Agents Directly

Visiting open houses on your own or calling the listing agent is a quick way to discover information and what you like and dislike. Be sure to register with the host agent and inform them if you are currently working with an agent. Keep your excitement in check, as the host agent represents the seller. It's best to keep your intentions discreet, as anything you say or do can be used against you in negotiations!

Builder Homes

Creating your dream home is an adventure. Many buyers are surprised to learn that a builder's role is very similar to that of a traditional home seller. Your buyer's agent will represent you as a buyer and use their expertise to ensure you have the best possible experience and get the best deal. Many builders budget for a buyer's agent commission regardless of whether you have one, so take advantage of my experience and understanding by following their policies when visiting developments.

For Sale By Owner

If you find a For Sale by Owner property, let your agent know so they can help you maximize the process. They have the expertise to make contact, negotiate, and ensure the entire transaction goes smoothly. Your agent can help you save money in the transaction and, more importantly, save you the headaches of managing the purchase on your own.

Example

When a buyer who has signed a written buyer's agent agreement contacts another agent, it can lead to a complex situation regarding procuring cause and commission payments. Here's how it might unfold:

The buyer signs an exclusive buyer's agent agreement with Agent A, establishing a legal relationship and potentially agreeing to pay a fee for their services.

The buyer then contacts Agent B, perhaps at an open house or through another listing, without informing them about the existing agreement with Agent A.  Agent B shows the buyer a property, and the buyer decides to purchase it through Agent B.

A dispute may arise between Agent A and Agent B over who is the procuring cause of the sale. This dispute would typically be resolved through arbitration by the local real estate board.

If Agent B is determined to be the procuring cause (for example, if they showed the property and facilitated the sale), they may be entitled to the selling portion of the commission from the transaction.

However, the buyer may still be liable to pay Agent A's fee separately, as per their written agreement. This is because the buyer's agent agreement is a contract between the buyer and Agent A, independent of the outcome of the procuring cause dispute.

In this scenario, the buyer might end up effectively paying two fees: one indirectly through the sale (which goes to Agent B as the procuring cause) and one directly to Agent A as per their agreement.

This situation underscores the importance of clear communication between buyers and agents, and the need for buyers to understand their obligations under a buyer's agent agreement. It also highlights why agents should always ask potential clients if they're already working with another agent to avoid such complications.

For more information, download our Buyer's Agent Guide. You should be comfortable talking with a real estate professional how this works and your available options. 

Maximizing a Homeowner's Chance to Sell

Recent policy changes made by the National Association of Realtors (NAR) have shifted the dynamics of buyer's agent compensation, prompting sellers to reconsider their strategies.

Many buyers, especially first-time homebuyers, have limited savings and may struggle to cover additional costs beyond the down payment, closing costs, and other expenses associated with purchasing a home.  Mortgage lenders typically do not allow buyers to include agent fees in their loan amount, meaning buyers must pay these fees out-of-pocket, which can be a significant financial burden.

Requiring buyers to cover their agent's compensation, as opposed to the traditional seller-offered model, exacerbates affordability issues and limits many buyers' ability to purchase a home. To maximize market appeal and facilitate a quicker sale at full market value, sellers should strongly consider offering buyer's agent compensation.

1. Increased Buyer Pool: Offering compensation to buyer's agents can attract more potential buyers. Many buyers rely on agents to navigate the home-buying process, and agents are more likely to show homes where they are compensated, expanding the pool of potential buyers for the seller's home.
2. Competitive Advantage: In a competitive real estate market, offering buyer's agent compensation can make a seller's property stand out compared to similar listings that do not offer such incentives. This could lead to quicker sales and potentially higher offers.
3. Facilitated Negotiations: Providing compensation can simplify negotiations. Without the need for buyers to negotiate agent fees separately, the transaction process becomes more straightforward, reducing potential friction points that could delay or derail a sale.
4. Legal and Compliance Benefits: Buyer agents help ensure compliance with legal and regulatory requirements during real estate transactions. By compensating buyer agents, sellers can mitigate the risk of non-compliance and potential litigation, which could arise from handling complex paperwork and disclosures on their own.
5. Market Perception: Not offering buyer's agent compensation might create a perception that the seller is less flexible or cooperative, which could deter potential buyers and their agents. This perception can be particularly detrimental in markets where such compensation is customary.
6. Preservation of Market Norms: While the NAR settlement allows for commission negotiations, many buyers and sellers are accustomed to the traditional model where sellers offer compensation to buyer's agents. Deviating from this norm might confuse or alienate potential buyers, affecting the property's marketability.

Sellers who choose to offer buyer's agent compensation can enhance their property's appeal and attract a wider range of buyers resulting in obtaining the highest price, in the shortest time, with the fewest problems. In a competitive market, this strategic decision may be crucial for achieving a successful and timely sale.

VA Allows Buyer-paid Broker Fees

The U.S. Department of Veterans Affairs, known as VA, issued a policy change that now allows payment to buyer brokers on VA loans.  They will be subject to certain safeguards, such as the requirement that all buyer-broker fees charged to veterans "must be reasonable and customary within local markets."  The circular is effective Aug. 10, 2024, and is valid until rescinded.

The VA also clarified that veterans can still ask sellers to cover these fees which in most cases will be negotiated in the offer to purchase agreement.  As the practicality of the settlement of the lawsuit becomes clearer, VA is expected to issue a permanent policy.

This change in policy will protect veterans in situations where there is competition for a particular property and the seller might select another offer because those buyers were paying their own buyer's agent fee.  Prior to this policy change, veterans were not allowed to pay, "under any circumstances, be charged a brokerage fee or commission in connection with the services of such individuals."

Both the National Association of REALTORS� and the Mortgage Bankers Association have been lobbying the VA to address this prohibition and are thankful for addressing the issue to keep veterans who want to use their VA benefits to purchase as home.

VA mortgage loans have many benefits and options to structure a home purchase to fit your individual situation.  Your real estate professional can help you find the home that fits your needs with affordable financing.

For more information on changes with buyer's agents, download Buyers Agent Guide and contact your agent with any questions you may have.

 

Smart living with home automation

In today's fast-paced world, home automation is becoming increasingly popular among homeowners seeking to enhance convenience and reduce energy costs. With advancements in technology, smart home devices offer innovative solutions that not only simplify daily tasks but also promote energy efficiency and sustainability.

Whether you're looking to upgrade your existing home or are in the process of building a new one, incorporating these home automation trends can significantly improve your living experience while saving you money in the long run.

• Smart Lighting - Automate your lighting to save on energy bills by setting schedules and controlling brightness and color through a smartphone app.
• Enhanced Home Security - Invest in smart security systems with features like facial recognition, motion sensing, and real-time alerts to enhance safety and provide peace of mind.
• Smart Thermostats - Use smart thermostats to learn your schedule and optimize heating and cooling, reducing energy consumption and lowering utility costs.
• Voice-Controlled Assistants - Incorporate voice-controlled assistants to manage daily tasks and control other smart devices, enhancing convenience and efficiency.
• Smart Appliances - Upgrade to smart appliances that offer features like remote control, energy efficiency, and inventory management, particularly in the kitchen.
• Sustainable Living Solutions - Implement energy-efficient appliances and solar-powered systems to reduce your carbon footprint and utility expenses.
• Smart Entertainment Systems - Integrate smart entertainment systems for a customized audio-visual experience that can be controlled remotely or by voice.
• Touchless Technology -Install touchless faucets and smart showers to promote hygiene and water conservation while adding convenience to daily routines.
• Eco-Friendly Smart Toilets - Consider eco-friendly smart toilets that offer features like water-saving flushes and self-cleaning capabilities, contributing to a sustainable lifestyle.

By integrating these home automation trends into your living space, you can create a more efficient, convenient, and enjoyable home environment. Not only do these innovations enhance your daily routines, but they also contribute to long-term savings on energy costs and improve the overall value of your property.

Embrace the future of home living by exploring these smart solutions and take the first step toward a more automated and sustainable lifestyle.