When you buy a house after Aug. 17, you’ll do things differently than before. Rules changed on that date, due to the settlement of an antitrust lawsuit.
Unlike before, you will decide how much your real estate agent will be paid for representing you when you buy a home. And your agent won’t be paid by the seller’s agent. Instead, you’ll probably ask the home’s seller to pay your agent — a request that will be subject to negotiation.
In short: It won’t be the same purchasing process that your parents, siblings and friends went through when they bought their homes before the legal settlement with the National Association of Realtors.
Here’s how the new process will work.
You’ll sign an agreement before touring homes
You’re browsing real estate websites and you’ve spotted a house that you want to visit so you can see inside — this is known as a home tour. Before a real estate agent escorts you inside, you will be required to sign an agreement that defines what the agent will do for you.
The agreement can outline a lightweight and short-term relationship with the agent or it can be a longer-term contract — whatever you negotiate.
On the lightweight end of the spectrum, you could sign a touring agreement that lasts a day or a week or gives you access to just one or two houses. Think of it as giving the agent an unpaid audition. “I give them options. Option one is we could just sign the agreement just for today,” says Danielle Rownin, real estate agent with Keller Williams Realty in Connecticut. If the agent and client aren’t a good fit, she adds, the agreement expires at midnight “and we’re free to move on.”
You’ll sign an agreement even if the agent gives you a virtual tour, which is typically done by walking around the house with a cell phone camera. But you won’t have to sign a touring agreement to visit an open house. Likewise, you won’t have to sign an agreement for the seller’s agent to give you a tour of the home, because that agent is working for the seller and not for you.
You’ll sign an agreement when the search gets serious
At some point, you’ll officially hire a buyer’s agent. You’ll sign a wordier and longer-term contract that not only describes the agent’s responsibilities, but also how much the agent will be paid. It might be called a buyer agency agreement, a buyer-broker agreement or a buyer representation agreement. These agreements aren’t new; in fact, they’ve been required in some states. But now they’ll be required just about everywhere.
This could be the first contract you sign; you don’t have to use touring agreements. Or you might build a rapport with an agent during a touring agreement and convert it into a buyer agency contract.
It’s still possible to buy a house without hiring your own agent to represent you, but it’s discouraged.
You’ll negotiate the agent’s pay
The contract will spell out how much you will pay the agent for representing you. “It could be a flat fee — small or large — or it could be a percentage of the purchase price,” says Leo Pareja, CEO of eXp Realty.
Real estate brokerages will experiment with flat fees and other pay structures such as hourly rates. But for now, most buyer’s agents will charge commissions that are a percentage of the home’s price. Experienced agents might request higher percentages, and newbie agents might ask for less. You’ll have to put on your negotiating shoes and push for a commission that works for you.
If a buyer’s agent requests a 3% commission, “You should definitely say, ‘That seems high to me. Would you be willing to lower that figure?’ That’s all you have to say,” says Stephen Brobeck, senior fellow for the Consumer Federation of America.
Some agents might respond with a lower commission. Others might hold firm, telling you that you get what you pay for. This unyielding approach might impress you if you believe it means they’ll advocate zealously for you. Just keep in mind that there are plenty of agents who will compete for your business, and some might charge less. You don’t have to sign a contract with the first agent you negotiate with.
Percentages are abstract numbers, so doing the math to calculate the cost of the commission in dollars can help you understand what you’re committing yourself to. Take a $400,000 home, for example. A 3% commission would amount to $12,000, while a 2.5% commission would cost $10,000.
You’ll deal with contract elements besides pay
The duration of the contract is another thing you’ll negotiate. The agent might want to lock you in for 90 days, explaining that we’re in a seller’s market and it might take a while to make a successful offer. However, Brobeck says 90 days is too long. “You should not accept anything…
Read More: Here’s what home shoppers should know about the new buyer’s contracts