What if buying your dream home suddenly costs more than the sticker price—all because of new real estate regulations? The aftermath of the recent Sitzer-Burnett lawsuit has introduced new challenges for buyers, and understanding them is key to protecting your wallet.
Welcome to part 2 in my article series about the recent Sitzer-Burnett lawsuit against the National Association of REALTORS® (NAR) and the outcomes of that settlement. The first article in my series, NAR Settlement Misconceptions, sets the groundwork for this article by clearing away some common misconceptions that were popular in the media coverage of this case.
This article focuses on the impact buyers face now that new regulations are up and running – and they have more to keep track of than ever. With the push to move the real estate industry to a model closer to other professional advisories, buyers are more likely than ever to factor in paying their agent for the work they do. REALTORs® remain your best asset while buying your next home, and finding the right agent for you goes a long way to making memorable moves.
Let’s take a closer look at what’s changed for buyers.
The Crux of the Situation
With all of that said, there is one omnipresent change for buyers: where the money comes from to pay their agent. From shopping for an agent to looking for homes to negotiating with the seller, buyers must now be more aware of their agent’s compensation than before the settlement. The good news is that the same options as ever are on the table. While industry standards are slowly shifting, these three options are still, functionally, where the money comes from to pay buyers’ agents:
- Compensation offered by the seller’s brokerage via the Cooperating Broker Compensation Agreement
- Negotiated concessions from seller to buyer
- The buyer foots the bill
Shopping for an Agent
With the new NAR regulations, the changes for buyers start when you’re shopping for an agent. Before seeing any properties with an agent, you need a signed contract called an Exclusive Buyer Agency Contract. This contract covers how long you’ll be working together and how much your agent will be paid. Just like contracts with other professional advisors.
While real estate agent test-drives are a thing of the past, the Buyer Agency Contract doesn’t have to lock you into a single agent for the long run. Negotiate a contract for a limited time period, see if you like the agent, then make an informed decision. As with any contract for services with a professional advisor, be sure the terms work for you before signing anything, and that you’re only working with one at a time.
Failing to follow these new rules could leave buyers financially exposed—either paying more than anticipated or getting caught in legal disputes.
Searching for Properties
The specter of the settlement continues to loom while you’re searching for properties. A direct result of the settlement is that MLSs are no longer able to list the cooperative compensation being offered by listing brokerages. That means you, the buyer, won’t be able to know if you can afford a property without getting your agent involved. Gone are the days of buyers doomscrolling through MLS feeds and scheduling showings on their own. While 3rd party websites (like COMPASS.com) are still able to advertise cooperating compensation, standard operating procedures encourage clear communications between buyers’ and sellers’ agents starting early in the buying process.
As buyers, it’s more important than ever to be aware of your limitations around buying power. Trends and pricing from recent years haven’t caught up to our new standard operating procedures. While many sellers recognize the value of offering cooperating broker compensation, others are pushing for buyers to carry that financial burden.
You should have an informed conversation with your agent about their compensation, how it impacts your buying power, and what strategies they can use to help you get the most for your dollar.
Seeing Properties
This lawsuit and resultant settlements have impacted the way you see properties, too. While this has been the case here in Pennsylvania for decades, this is important enough to bear repeating: If you have signed a Buyer Agency Contract and you go to a showing or open house without your agent, you could be liable to pay both your contracted agent and the showing agent.
How can this be? While I don’t engage with poaching clients from showings and open houses, some do, and the increased emphasis on contractual obligations don’t care about procuring cause. “Procuring Cause” is the idea that whichever agent introduces a buyer to a property could be due compensation if that buyer buys the property. Basically, if you go to an open house without your agent, the showing agent could claim you as their client for that property.
While things haven’t changed too much when it comes to open houses, the specifics are more important than ever. The last thing you want is for a showing agent to claim procuring cause and try to force you into paying them as well as your contracted agent. To avoid this, as always, go to any open houses and showings with your agent. If your agent can’t make one, then have them call the showing agent and confirm they’ll honor your Buyer Agency Contract.
Closing the Gap
The settlement has pushed the world of real estate closer to that of other professional advisory groups. Now, contracts between buyers and their agents clearly identify the scope, duration, and compensation for services. Buyers beware of agents that don’t take the time to have these conversations – open communications between agents and their clients is the foundation of a good working relationship in all professional advisories. By working closely with a trusted REALTOR®, maintaining good communication, and staying informed on industry shifts, you can still make confident and informed decisions in this new real estate environment.
Thank you for joining me on this second dip into the ramifications of the Sitzer-Burnett lawsuit against NAR! We still have lots to cover, from what sellers need to know to how the industry is responding, and more, so stay tuned for the rest of my series! Next month, I’ll be discussing the changes for sellers.
Are you considering buying a home and would like to know more about agency, representation, and the process in today’s real estate world? I’ll always make time to answer questions and help people like you find their place in the world. Can’t wait to talk with you!
