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A Brave New World for Real Estate in California!

The NAR settlement is in it's final stages and the real estate industry is getting ready to implement several new rules regarding compensation. In a way, it is a "Brave New World" for all of us. Unchartered waters! It will bring a shift in the way we have conducted real estate for many years. Change is never easy but somehow we (buyers, sellers and agents) always manage to adapt. The launch date for the big change is early August but I'll start implementing some processes as soon as I can. Here are some highlights to help you navigate the changes:

All agents and buyers in California will now be required to sign a Broker Buyer Agreement before visiting any properties. It will establish an understanding of relationship, duties, and compensation.

Before viewing homes and hopefully at the beginning of a new relationship, the agent and buyer will establish what the buyer's agent fee shall be and how it will be paid on the Buyer Representation and Broker Compensation Agreement.

Commission will now be bifurcated on listing contract. Listing Agent and Buyer's Agent compensation will be negotiated and noted separately on the agreement. Sellers can agree to pay for buyer's agent commission, buyer's concessions (if allowed by lender) or they may choose to not pay any compensation to buyer. Of course, the Listing Agent who is working with the seller will always be paid, otherwise, it will be a For Sale By Owner with no representation.

Listing agents will be responsible for explaining the benefit of continuing to pay buyer's agent commission. Low or no commission creates a disincentive to agents to bring buyers to the seller's home.
If a buyer does not have funds to pay the commission, the agent will have no obligation to show the home unless the buyer has agreed to pay for services in the Broker/Buyer Agreement. Consequence: The seller could lose out on a large pool of potential buyers.

If sellers are not willing to pay buyer's agent commission, buyers can always opt to ask seller to pay during contract negotiation.

Open house protocol is still being ironed out but before a visitor enters an open house, an agent may need to have the visitors sign an Open House Advisory Disclosure to establish an understanding of relationship. It could be mandatory but not sure yet.

Lenders are still working on how they will be handling possible financing of commission so stay tuned. I did read that the U.S. Department of Veterans Affairs (VA) said it will temporarily lift its rules preventing veterans from paying real estate agents when buying homes. It will go into effect on June 1

As mentioned, this is just a quick overview of some of the main changes on the horizon. We don't have all the forms yet and we will be getting additional guidance on protocol so stay tuned as we we prepare to embark on this new adventure!


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