Like the old saying goes, the only constant is change, and real estate law is no exception. There are some significant changes on the horizon for realtors, and in today’s newsletter, I want to share an overview of what to expect if you are planning on buying or selling property this year.
As always, please let me hear from you. Reply to this email to send any comments or inquiries my way.
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Managing Partner
——– Law Firm
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What’s the Scoop?
A slate of recent lawsuits has changed interactions between buyers, sellers, and agents in real estate transactions across the country. As a result, a new law requires agreements between a real estate buyer and an agent to be in writing before a buyer even tours any property.
The legislation was passed as a way to correct what courts perceived to be practices that unfairly limited competition among agents. According to the ruling, the National Association of Realtors (NAR) fixed buyer-agent commission rates by requiring the seller’s agent to offer a set commission (usually at about 2.5%-3%) to any buyer’s agent. What this means is there was little motivation to reduce fees because the commission was already defined, and buyers never realized they were paying this commission when they paid the sales price. In the ruling, courts viewed this as a way of reducing competition, which is a violation of federal law.
With an agreement between the buyer and seller agents in writing, MLS listings can now no longer show pre-defined commissions, since agents will now have to negotiate commissions directly. As a result, the commission rate is more transparent for buyers and sellers.
How Does The New Ruling Affect Real Estate Transactions?
The impact of the new legislation on real estate transactions will be quite profound. If you want to purchase a property, you must first enter into a written contract with your real estate agent before touring any property. This contract must state the exact compensation the buyer will pay in very specific terms, a clause declaring that is not allowed to receive more compensation from any source other than what is stated in the contract, and a notice stating that broker fees are negotiable. All of these requirements are meant to promote transparency and competition in the real estate purchasing transaction, a way to promote fairness for the buyers in a real estate transaction.
Another result of the new legislation that helps create a fair purchasing environment is that because multiple listing services (MLS) can no longer offer buyer-agent commissions on an MLS, real estate brokers cannot steer their clients toward properties with a higher commission.
In all, the legislation aims to make the process of buying a property fairer for the purchaser.
What Does This Mean for Me?
So the next time you are considering purchasing a property, understand that you should expect to sign a contract before touring anything. You must also be prepared to negotiate a commission with your agent.
If you are selling a property, you no longer have to pay the buyer-agent commission, which is a great win for you. However, you may consider offering a commission to make you a more competitive seller.
If you have questions about buying or selling a piece of real estate, please reach out to me here. I am always available to answer your questions and walk you through the legal steps of contracts and real estate sales and purchases.
I look forward to hearing from you!
In the News
_______, of the _______ Law Firm, was recently interviewed by the Chicago Tribune about the new legislation and its effects on real estate agents. Read more here.
About Us
We specialize in helping our clients navigate the legal complexities of real estate transactions, whether as buyers or sellers. Our areas of expertise include family homes, duplexes, and rentals. We have helped thousands of clients make sound financial decisions when purchasing their dream home or selling a starter home. Learn more here.
