A lawsuit settlement proposed by the National Association of Realtors (NAR) recently received preliminary court approval, but it raises questions about whether buyers with limited resources, especially first-time homebuyers, can afford the closing costs. It is occurring. The settlement requires buyers to sign a written buyer agreement that clearly discloses to brokers who will receive compensation and how much.
Although the proposed settlement does not directly address this issue, a statement from the Department of Justice (DOJ) in the Nosarek case states: A buyer must be able to receive a designated amount from the seller’s proceeds in the offer to purchase. Buyer Broker may be required to pay the Buyer Broker the amount sale of the house. This article suggests ways in which you can do this while increasing the likelihood that your buyer agent’s compensation will be negotiated.
Before any interaction takes place between buyer and seller agents, potential sellers and buyers enter into an agreement with an intermediary. The buyer’s contract describes what services the buyer’s agent will provide and how they will be compensated. Similarly, the seller agreement will include the services provided by the listing broker, its compensation, and whether the listing broker is authorized to provide compensation to the buyer broker or to advertise the seller’s concessions to the buyer. will be listed. When a buyer finds a property they would like to make an offer on, they submit an offer to the seller (through their agent) that includes both the home price and the buyer’s commission. Both elements of the offer are negotiated by the seller and buyer with the assistance of an agent.
Here’s an example of how this works. The buyer submits an offer of $400,000 for her on the home and $12,000 for his agent’s fee. With a potential net price of $392,000, the seller could make a counteroffer of $404,000 for the home and $12,000 for the agent. Negotiations will continue until the parties agree on the terms of the sale. In the process, the buyer’s or seller’s agent may even agree to reduce their compensation to facilitate the sale. The final purchase and sale agreement is the document that supports the distribution of funds at closing.
This proposed process would allow the seller to agree on the amount they are willing to pay to the buyer intermediary. Sellers may request that their agents not make offers that require them to provide this coverage. In a seller’s market, there’s a good chance this will happen. But listing agents will also have the opportunity to explain to clients that many buyers require seller assistance to compensate buyer brokers. Listing agents should advise sellers to evaluate each offer based on the net sales proceeds after paying all commissions. Buyer agents should advise buyers to submit an offer that exceeds any other offer that does not include the buyer’s agent’s compensation. In the previous example, if the buyer was planning to offer her $400,000, she might consider offering $412,000.
This proposal also requires little change in format. The form containing the buyer’s offer to the seller can include a blank space to specify the buyer’s broker fee that the seller will pay at closing. Blank spaces may be added to the final purchase and sale agreement to reflect the final buyer’s agent’s compensation and seller’s agent’s compensation. In our proposal, the purchase and sale contract is executed by the buyer and seller only after the buyer, buyer’s agent, seller, and listing agent agree to the terms of the sales contract.
This proposal does not solve all the problems faced by buyers with limited resources. Home prices and interest rates are relatively high, and a significant number of recent buyers are facing financial hardship. However, this proposal would provide professional assistance in the home buying process while ensuring that brokers are compensated under current Federal Housing Administration and GSE regulations when buyers are unable to do so at their own expense. It provides a way to retain representation. .
This column does not necessarily reflect the opinion of HousingWire Editorial Department or its owners.
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