Unless you've been hiding under a rock, you've probably heard via the news or your favorite social media feed that big changes are coming to the process of buying or selling a home. The first wave of changes will be rolled out on August 17th, 2024. My goal is to simply explain what's changing and how it may affect you if you are in the market.
What Happened?
In March 2024, the National Association of Realtors (NAR) reached a settlement agreement with plaintiffs to end litigation brought forward by home sellers in at least 26 different class action law suits across the United States, claiming that buyer's agents' commissions violated anti-trust laws. Locally, to comply with this lawsuit, Realtor associations have made updates to contracts (which they do anyway at least once annually) effective 7/1/2024, and the Multiple Listing Service (MLS) which Realtors use to advertise their listings (Bright MLS) will STOP showing compensation offered to buyer brokerages effective 8/14/2024. Here's what home buyers and sellers in the DMV need to know about these changes.
What You Need to Know
If you are a BUYER of residential real estate, you should be signing a written agreement with your Realtor of choice BEFORE you tour properties together
In Virginia, if you tour a home (either through an OPEN HOUSE or with another agent in a private showing) but do NOT have a written buyer's agreement with a licensed realtor, the only party who may "earn" money from a real estate transaction as a result of your written offer is the listing agent (who gets a commission) and the seller (who gets paid for their home). By signing a written buyer's agreement before you cross that threshold, you are entering a contractual relationship with a representative who should be researching home choices, pulling comparable sales, finding qualified lenders, and lining up home inspectors and other vendors to help you verify the home you eventually ratify on is worth your investment. Virginia is, after all, a "buyer beware" state. Without a written buyer's agreement, the person who lets you into a home has no fiduciary duty to you. They may or may not have your best interests in mind long-term. For a good buyer's agent, making a commission on one deal isn't as important as having a client who feels good about their purchase for years go come and says good things about them when they aren't in the room. Below is the portion of the current Northern Virginia Association of Realtors (NVAR) "Exclusive Right to Represent Buyer" agreement that offers guidance on COMPENSATING your agent...
If you are a SELLER of residential real estate, the conversation you have with your LISTING AGENT won't change very much ...
Your listing agent should be doing everything they can to attract qualified buyers. This hasn't changed. Listing agents work with you, the seller, to come up with a market price appropriate for your home and then make it look as attractive as possible to attract buyers. Listing agents also document all the great things you've done during your tenure, so that buyers get a greater level of comfort that they are purchasing a property that has been well loved and maintained. They also show you ahead of time what you will most likely NET from the proceeds of your sale, once you pay off your mortgage, pay title fees, pay Realtor fees, and close out outstanding tax assessments and HOA fees. They follow up with buyers agents and unrepresented buyers from OPEN HOUSES until they have one (or perhaps several) written offers you are willing to accept. The listing AGREEMENT you sign with your agent will outline how much you are willing to pay your agent for their efforts, and it will also show how much you are willing to pay a buyer's agent (if anything) for their efforts. Included below are the relevant paragraphs regarding listing agent compensation and buyer's broker compensation in the current NVAR "Exclusive Right to Sell" Listing Agreement.
Still confused? Don't worry - so are a lot of people
In March, immediately after the NAR SETTLEMENT was announced, Barbara Corcoran, founder of the Corcoran Group, sat down to chat about "what's next" with two interviewers from YAHOO FINANCE. Her take? Not much will change, but a lot of people are confused.
The first contract you write (or receive) may not pan out - and that's okay!
The home pictured right is a property I sold in 2023 in a neighborhood called "Grenata", which is known for high end ($2m+) homes. My clients, the sellers, had two contracts fall through before the third one successfully went to closing. There are various reasons and methods buyers may opt out of a contract once they "win" out on a competitive bid, and that makes it all the more important for the representatives of both the buyers and sellers to do their very best to advocate for their party.
I personally believe everything happens for a reason and know that the current owners of this home are thrilled with their purchase - because I met them at an OPEN HOUSE and I spoke multiple times with their buyer's agent, who helped them with a job relocation out-of-state. The buyer's agent kept in touch with me when her clients missed out on their first opportunity to buy this home, and because we had established a good line of communication, when the opportunity presented itself for her clients to re-bid, they won out!
Homeowners are holding onto their homes longer now, so when they finally are ready to sell, getting professional assistance makes sense
The average American homeowner has lived in their home for about 12 years now, and many homeowners are staying because they have decided to "age in place." https://www.redfin.com/news/homeowner-tenure-2023/ Nearly 40% of baby boomers have lived in their home for at least 20 years, and another 16% have lived in their home for 10-19 years. For Gen Xers, more than one-third (35%) have lived in the same home for at least 10 years. So, once these sellers (or their families) are finally ready to move, chances are their homes may need some additional hand holding! A good real estate agent can make the difference in their next transaction!
Still confused? Get in touch and we'll talk it through.
If you're contemplating a move in the next few months, but you're still not clear about what it all means, please reach out. I am never too busy to answer questions, offer advice or just chat about the market. And I won't ask you to sign anything ;)
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