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What Is The Latest on Realtor Commissions?

You may have heard there has been a sea change in realtor commissions, due to a big lawsuit in 2023.

For as long as I can remember, the seller of a property has always paid the realtor commissions for both the buyer and the seller. That has changed. The buyer's Realtor will now most likely require the prospective buyer to sign a document before showing any properties.

My plan, should I buy another house, is to sign what's called a "Seven-Day Touring Agreement" and see as many houses as possible in that seven days.  If you are giving a Realtor a "try", this is the ticket, because you may decide after two days that this person is not for you.  It's the ticket regardless, because you may well have found a house you love in that first seven days.  After the seven days, or if you decide you want to make an offer on a house you've seen, you will have to sign a separate agreement with your Realtor, or if you and the Realtor are not clicking, choose another Realtor.

This second document, a "Buyer Representation Agreement" or your Realtor may have one called "Buyer's Agency Agreement", spells out the duties and responsibilities the Realtor has in their business relationship with the buyer. Be sure to read this carefully before you sign it, otherwise you may be in for an unpleasant surprise when you close or settle on your house.

It will basically say that if the seller of the home you buy doesn't agree to pay the commission for your Realtor, you will have to pay it (thousands of dollars!).  Further, these contracts are hard to terminate.  In most of these contracts, there is not a way to terminate them.  Realtors want to make sure they don't miss out on a commission if you buy a home they showed you.  

One thing this means is that it is more important than ever to not choose any old Realtor to represent you when purchasing a home.  You want one with experience, who is savvy and knows how to save a deal when it's going south (if that's what you want) or get you out of a deal you don't want to go through with.  You want one that puts YOUR wants and needs first, not theirs. 

A full-time, professional Realtor with a strong track record of satisfied clients is what you need in the competitive home purchase market we are in right now.  The purchase of a home costing hundreds of thousands of dollars is no time to give a newbie a chance.  Sorry to all the newbies.

Always keep in mind: a Realtor makes more money the higher the sales price.  So they have a built-in incentive to want you to pay more for a house, not less.  They also want you to buy something, anything, which again goes against what is best for you.

There's another problem:  if the contract is an "exclusive" one, even if you buy a house that your Realtor didn't show you, you owe them a commission.  Try to at least get a "non-exclusive" contract, which means you only have to pay a commission if you buy a house the Realtor showed you.

While the lawsuit was intended to protect consumers, it has had the unintended consequence of making the home purchase landscape more complicated, and in some cases, more expensive, for home purchasers.  However, the purpose of the lawsuit was to show how high fixed Realtor commissions were inflating the price of homes, since a seller had to figure in a 5 - 6% commission for the two realtors when deciding how to price their home.  And in my experience, most realtors are not worth what they were getting paid.

You've heard the expression "Buyer Beware"?  This is one of those cases. Here's an example of one of these agreements. 

 Free Buyer Agency Agreement - PDF | Word – eForms

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