Understanding the New Buyer Representation and Broker Compensation Agreement: What You Need to Know

If you're in the market to buy a home, you might have heard some buzz about the changes coming on August 17, 2024. As part of a recent settlement by the National Association of Realtors (NAR), there are new requirements that all buyers need to be aware of before touring properties with an agent.

Do I Need to Sign an Agreement Before Touring Properties?

The short answer is yes. Starting August 17, 2024, all buyers will need to sign a Buyer Representation and Broker Compensation Agreement (BRBC) before they can tour properties with an agent. While these agreements have been around for years, not every buyer’s agent required clients to sign them. However, due to the recent changes, they’re now mandatory.

What is the Buyer Representation and Broker Compensation Agreement?

The BRBC agreement outlines the duties of the buyer’s agent as well as the obligations of the buyer. The agreement can be either exclusive or non-exclusive and is limited to a maximum of three months. This is a key change from how things were done before, where the listing agent would negotiate both their own commission and the buyer's agent's commission upfront when listing your home.

But now, with these changes, the buyer’s agent’s commission is negotiated when the offer is presented. This shift aims to make commission payments more transparent and fair for all parties involved.

What About the Property Showing and Representation Agreement?

If you're not ready to commit to a longer-term agreement, there's another option: the Property Showing and Representation Agreement. This is a shorter form that’s limited to just three properties and a 30-day representation period. Think of it as a trial period, much like dating. This agreement allows you to work with an agent, get to know them, and see if they’re the right fit for you before making a longer commitment.

How Does Commission Payment Work Under These Agreements?

Both the BRBC and the Property Showing and Representation Agreement disclose how much the buyer will be responsible for paying their broker. Importantly, if the seller covers the buyer’s agent's commission in full, that amount offsets any obligation the buyer would have had, meaning the buyer wouldn’t owe any commission.

This new approach changes the timing of when and how commission is discussed and agreed upon. After August 17, 2024, commissions paid by the seller to the buyer's agent will now be negotiated at the time the buyer makes an offer, rather than upfront when the property is listed. The buyer and the buyer’s agent can modify the BRBC accordingly if the seller happens to counter the amount of compensation, and this process aims to make the payment of commissions clearer to everyone involved.

No Need to Panic—These Agreements Are Flexible

If you’re concerned about these agreements, there’s no need to panic. The non-exclusive representation agreement can be easily canceled if things aren’t working out. And remember, the Property Showing and Representation Agreement is limited to just 30 days and three properties, giving you plenty of flexibility.

Once you find an agent who’s the perfect fit, you can extend the agreement or enter into a new one at the end of the representation period.

Need More Information? I'm Here to Help!

I know this is a lot of new information, but I’m here to help you navigate these changes. If you have any questions about the new Buyer Representation and Broker Compensation Agreement or anything else related to real estate, don’t hesitate to reach out. Feel free to message me or give me a call—I’m always here to help you with your real estate needs.