As seen on New Mexico Living in August, 2024:
Recap of the content below
Question 1:
We’ve all been hearing about the changes in the real estate industry but I’m not sure people really understand what it means for them. We know that buyer’s broker’s compensation won’t be listed in the MLS anymore.
Answer:
That’s true! In case people don’t know, an MLS is where Realtors can list the houses they are representing for sale and have it feed to Realtor.com, and other real estate websites. We used to be able to offer compensation to buyers brokers as well. That piece has gone away. Not having buyer’s broker’s compensation in the MLS means we won’t know what other brokers earned on past sales and we won’t know what any particular house is currently offering without calling the listing broker. This change will lead to more competition in what brokers charge since they won’t know what their colleagues are getting paid and it will also make it harder for brokers to steer buyers away from certain houses if they are not offering adequate compensation which has been a specific concern of the Department of Justice.
Question 2:
Now let’s talk about buyers having to sign a compensation agreement with a broker before seeing a house. We know this is also a part of the changes that have happened. Tell us more about that.
Answer:
That is one of the biggest changes to come from the settlement. And I know it can be daunting to commit to working exclusively with a broker you don’t know before seeing your first house with them. It’s much easier if you already know them, or you’ve been referred to them by someone you trust. But if you’re not sure you want to work with someone yet, you might ask to sign an agreement for a house or two, a single day, or a weekend before signing a longer contract. Or you might ask to sit down and talk to the broker first and see if it feels like a good fit. But ultimately, if you want a broker to work hard for you, it’s only fair to agree to only work with one broker and to commit to doing so in writing.
It’s also important to know Brokers who are members of the National Association of Realtors have absolutely no choice but to sign a compensation agreement or they will not be able to show you any houses, in person or virtually, unless they are listed by the company they work for. They are not being difficult or trying to trap you into an agreement. This is true for virtually any Realtor across the entire country unless it goes against their state law, or their association opted out of the settlement agreement. Neither of those things apply in New Mexico. So if a broker is willing to show you a house that is NOT listed by them or their company, they are violating the settlement and you should ask yourself if you really want to work with someone who is not following the rules they’ve agreed to.
But the most important reason to sign an agreement is to know how much you’re paying, when and how you’ll pay it, and what services will be provided to you by your broker. It’s the minimum we should expect from any professional we work with whether it’s a Realtor, financial planner, accountant or attorney.
Question 3:
This brings up the question everyone wants to know. What if a buyer can’t afford to pay for your services? What happens then?
Answer:
I think this is the question that is scaring buyers the most about signing a buyer broker agreement. Even though I don’t know what my colleagues charge, let’s assume they are getting paid at closing which is very common. If that’s the case buyers can write their broker’s fee into any offer they make on a house and ask the seller to pay it and they’ll always know if the seller has agreed to it or not so there won’t be any surprises. In other words, they’ll always know if they are about to make a decision where they might have to pay their broker all or part of their fee and can make decisions accordingly.
Let’s say someone finds a house they love. They write an offer and CAN’T get the seller to pay their broker’s fee. In that case they will have to talk to their broker BEFORE finalizing the agreement about what to do next. Some things are hard to figure out ahead of time because no one knows what the specific situation will be or how they might feel about it in the moment. Buyers will have to talk to their brokers about it when the time comes or they can try to discuss the various options before signing an agreement.
Question 4:
What do you say when buyers ask you what will happen if they can’t afford to pay you?
Answer:
At my company we often work with buyers who don’t have enough money for both their down payment and closing costs. In those cases we go into a working relationship with a buyer knowing that we’ll need to get the seller to pay for their closing costs. Since our fee is a part of their closing costs, we understand we need to make that part of the negotiation. In short, we tell buyers that “We understand you can’t pay us if we don’t get the seller to cover our fee. We will do everything we can to make sure that happens, but if we can’t, we’re going to talk to you about it before you sign any document that would result in you having to find money you don’t have. In other words, you’ll never end up signing a contract on a house where you don’t know what expenses you’ll be paying and what expenses the seller will be paying.”
Question 5:
That does sound like a lot for buyers to navigate. Wouldn’t it just be easier to only see houses where the seller is already offering the perfect amount of compensation to cover the buyer’s broker?
Answer:
This question is coming up a lot. Some buyers don’t want to see a house if their broker’s compensation is not being offered, but are they going to have their broker call every listing to see if the seller will pay all their broker’s fee? They could direct their broker to do that. Or they could treat it like any other closing cost. If you want the seller to pay it you’ll write it into the offer. We don’t call listing brokers before seeing houses to ask if the seller will lower the price, or if they would pay any other buyer closing costs. So why should you screen houses based on this one cost? See the houses you like. If you love it, make an offer and include your broker’s fee in it just like you would for any other fee you’d like them to pay. Not every offer is going to get accepted, but if you limit yourself to only those houses which are already offering the perfect amount of money, you might find yourself without a house at all. And remember, the goal is to find a place you will enjoy living, hopefully for years to come. The process might feel uncomfortable but it will be well worth when you find the house you’ve hoped for.
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