Are You Read for Buyer's Agency Agreements?

Navigating the Changes in Real Estate: Buyer’s Agency Agreements

The real estate industry is constantly evolving, and 2024 is no exception. As new regulations and practices take hold, it’s essential for Realtors to stay ahead of the curve. Mike Ferrante of the 21 Mike Team at Century 21 HomeStar and Tony Geraci, Broker/Owner of Century 21 HomeStar, are here to guide you through the most significant changes impacting the market. This blog post will explore these changes, focusing on buyer agency agreements, listing agreements, and compensation disclosure.

1. Buyer Agency Agreements: A New Mandatory Standard

One of the most significant changes in the real estate landscape is the mandatory requirement for buyer agency agreements. Starting August 17th, 2024, all buyers must sign an agreement with an agent before touring homes or engaging in any formal representation. This change marks a pivotal shift in how Realtors interact with potential buyers.

Understanding the Different Types of Buyer Agency Agreements

There are several types of buyer agency agreements that Realtors should be familiar with:

Exclusive Buyer Agency Agreement: This is the traditional agreement where the buyer agrees to work exclusively with one agent throughout their home-buying process.
Non-Exclusive Buyer Agency Agreement: This agreement allows buyers to work with multiple agents. It’s particularly useful for investors who might be sourcing deals from various agents.
Single Property Showing Agreement: This type of agreement is designed for one-time showings of specific properties. It’s useful for buyers who might not be ready to commit to a full buyer agency agreement.
Unrepresented Buyer Disclosure: In cases where a buyer does not want representation, particularly when dealing directly with the listing agent, an unrepresented buyer disclosure must be signed. This document clarifies that the buyer is not represented by the agent showing the property.

Transitioning Existing Clients

For agents who already have active buyer clients, it’s essential to transition them to these new agreements. Even if there’s an existing agreement in place, it may not include the newly required verbiage. It’s an excellent opportunity to reconnect with clients, reaffirm their commitment, and ensure all legal requirements are met.

2. Listing Agreements: Adapting to New Requirements

With the changes in buyer agency agreements come necessary updates to listing agreements. These updates ensure transparency and compliance with new regulations. Realtors must be proactive in updating their current listings with the appropriate documentation and disclosures.

Key Updates to Listing Agreements

New Verbiage Requirements: Listing agreements must now include specific language to comply with the latest legal standards. This includes detailed compensation disclosures and acknowledgment of buyer agency agreements.
Addendums for Existing Listings: Realtors should prepare addendums or disclosures for all current listings to address these changes. Sellers need to be informed about the new regulations and given the option to amend their listing agreements accordingly.

Why You Can’t Use Old Paperwork

Using outdated forms that don’t comply with the new regulations could lead to legal complications and loss of business. It’s crucial to adopt the new paperwork not just for compliance but also to benefit from improved clarity and transparency. As Tony Geraci advises, embracing these changes with a positive attitude can enhance client trust and satisfaction.

3. Compensation Agreements: Clarity and Transparency

One of the most significant changes Realtors will face is how compensation is handled, particularly with the removal of compensation details from MLS listings. Starting in August, compensation will no longer be listed in the MLS, meaning that compensation terms will need to be negotiated as part of the contract process.

Using Compensation Agreements

Ohio Realtors have introduced a new compensation agreement addendum, which outlines how a buyer’s agent will be compensated. This addendum is separate from the purchase contract and is signed by all parties involved, ensuring transparency and agreement on compensation.

Three Compensation Options: The compensation agreement typically includes three lines—compensation from the seller, from the buyer, or shared between the two parties. This clear delineation helps avoid confusion and ensures that all parties understand how the buyer’s agent will be paid.
Why Separate Addendums Matter: By using a separate addendum for compensation, you protect the terms from being unilaterally changed by the buyer or seller. This document is signed by all parties, including both agents and brokerages, which helps maintain the integrity of the agreement.

4. Adjusting to the Removal of Compensation in MLS Listings

With the Department of Justice pushing for more transparent real estate transactions, compensation details are being removed from MLS listings. This change will likely create more negotiation around compensation and could lead to increased use of compensation agreements.

How to Handle This Change

Realtors should prepare to submit offers that include the new compensation agreement addendum. While it’s still a good practice to inquire about compensation beforehand, the priority should be to submit offers promptly and handle compensation as part of the negotiation process.

Encouraging Buyers to View Properties

Even if a buyer is hesitant to view a property due to compensation concerns, it’s the agent’s responsibility to encourage them to consider all options. As Mike Ferrante points out, no situation in real estate is absolute—negotiations can always lead to a mutually beneficial outcome.

Final Thoughts

The real estate industry is entering a new era of transparency and accountability. While these changes may seem daunting at first, they ultimately aim to create a more equitable and clear process for buyers, sellers, and agents alike. By staying informed, practicing your explanations, and embracing the positive aspects of these changes, you can continue to provide exceptional service to your clients.

For more detailed guidance or if you have specific questions, don’t hesitate to reach out to Mike Ferrante and the 21 Mike Team at Century 21 HomeStar. Whether you’re a Realtor in Northeast Ohio or anywhere else, staying ahead of these changes will ensure your continued success in an evolving market.

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