What are Buyer Representation Agreements? Do I Really Need a Contract to Buy a House?

· Background: Pursuant to a nationwide class action settlement reached by the National Association of Realtors, participants in the Multiple Listing Service (i.e., me and other Realtors) are required to have a written agreement with a buyer prior to showing a buyer a residential property. In most cases, that “agreement” is a Buyer Representation and Broker Compensation (BRBC) agreement. The intent of this new rule is to provide increased transparency… we can chat over a beer in my garage about whether or not the objective has been met.

· But the BRBC says I have to pay for my agent’s commission… that’s not how it used to be! Yes… kind of. Until August 17, 2024, Sellers had the ability to offer a predetermined amount of compensation to be offered to a buyer’s broker (“agent”), and for the most part, Sellers would do just that – pay the buyer’s broker (often 2.5% of the transaction price). Today, a Buyer will sign this new agreement – BRBC – and agree to a commission amount or percentage that the Buyer, in theory, will pay to his/her agent.

· But… that commission that a Buyer agrees to pay doesn’t have to come from the Buyer. It is possible to still ask for (and get) the Seller to pay the Buyer’s agent commission via a “concession.” So far – and we’re just over one month into this new process – most Sellers have indicated a willingness to offer a concession to cover some or all of a Buyer’s agent commission. Every transaction is unique (YMMV), and this is definitely a term that I have and will continue to negotiate into my Buyers’ offers.

· And why would a Seller pay for a Buyer’s agent if the Seller doesn’t “have to”? Simple – most Buyers do not have loads of extra cash sitting around (most first time homebuyers have saved enough money to cover their closing costs and a nominal down payment). Since most Sellers want to maximize the possible buyer pool for the property they’re selling, those Sellers are incentivized to offer a “concession” to Buyers (to cover the Buyer’s agent commission).

· Simply put – everything is and will still be negotiable for both buyers and sellers (sale price, terms, commissions, etc.).