Buyer will now have to sign contracts before touring homes - PA

[Alan Asriants]

As the title of this post mentions, Buyer should be aware that now the MLS requires Buyers to be in a agency contract with their agent before scheduling any tours. This should have already been a common practice, but because of the commission structure before the NAR settlement, lots of agents did not execute contracts with buyers in order to gain them as clients.

Now Buyers must be ready to sign an exclusive, or non-exclusive agency contract (there is a difference) before touring properties. Your potential buyers agent should have the proper knowledge or at least a mentor that can help walk you through the contract, their fees, and what is involved in the home buying process. 

While this might be something that Buyers are not used to because they are not comfortable getting into an agreement with an agent. It should be a win-win for both parties in the future.

Buyers will win because they will do their complete due diligence and use a professional (as opposed to a family member or friend with just a license, who sells 1 home every 2 years lol) so that they can get the best representation possible. 

Buyers agents will win because then they will have a more secure buyer agent relationship, and a less likely chance that a buyer will go to another agent behind their back.

if you have any questions about the new contracts or the NAR settlement, I am happy to discuss them.

PLEASE NOTE: I am licensed in NJ and PA. Each state will have their own contracts, laws, etc. 

[Greg Kasmer]

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

[Alan Asriants]

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

[John Clark]

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

[Alan Asriants]

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

[John Clark]

 Nothing is ever free. Under the current system the commissions are just rolled into the price.

The problem will be when an independent buyer wants to see a house but won’t sign a buyer’s agent contract because he doesn’t need an agent.  That will put the seller’s agent in conflict with the seller, since he will be refusing to let potential buyers visit the property. 

The seller’s agent will have to vet the potential buyer on behalf of the seller and if the potential buyer is qualified, show him the property. If not, then the seller’s agent may have violated his fiduciary duty to his client, the seller.

[Jay Hinrichs]

Quote from @Alan Asriants:

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

just happened to my daughter in Vegas.. she normally works the Lux market so downpayment not an issue.. She took on someone from their gym who is a fHA buyer so they need closing costs.. Extra shows them a bunch of homes writes one up and seller will not pay a fee  they will give the closing cost but no fee.. Buyers have no money to pay my daughter. After much back and forth seller agreed to pay about 1/2 of a normal commish.. now she would have done it for free if she had to again based on the  relationship and how well she does in the industry but you can see how this will affect agents that really really need those commission to live and or stay in the industry..

Now for me and I did this back in the Carter years when rates where 18 to 20% and we had to do all sorts of financing magic.. I often just took my commissions on payments.. But again not every agent can affort to take payments for commish.. But it worked for me .. As I sold enough that I got full payment on to afford to do those types of deals and I can tell you I sold more RE than most in my market because I never let a deal fail because of downpayment issues.. Just a thought as you agents start to navigate the new rules.

[Alan Asriants]

Quote from @Jay Hinrichs:

Quote from @Alan Asriants:

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

just happened to my daughter in Vegas.. she normally works the Lux market so downpayment not an issue.. She took on someone from their gym who is a fHA buyer so they need closing costs.. Extra shows them a bunch of homes writes one up and seller will not pay a fee  they will give the closing cost but no fee.. Buyers have no money to pay my daughter. After much back and forth seller agreed to pay about 1/2 of a normal commish.. now she would have done it for free if she had to again based on the  relationship and how well she does in the industry but you can see how this will affect agents that really really need those commission to live and or stay in the industry..

Now for me and I did this back in the Carter years when rates where 18 to 20% and we had to do all sorts of financing magic.. I often just took my commissions on payments.. But again not every agent can affort to take payments for commish.. But it worked for me .. As I sold enough that I got full payment on to afford to do those types of deals and I can tell you I sold more RE than most in my market because I never let a deal fail because of downpayment issues.. Just a thought as you agents start to navigate the new rules.

 We will certainly have to start getting creating especially with low down payment buyers. I am seeing that the 2% buyer commission is more and more of a standard now. 

I'm worried that agents commissions are going to be cut drastically as people refuse to pay what they use to. Higher volume will work better in the future, even at a discount...

[John Clark]

Quote from @Alan Asriants:

Quote from @Jay Hinrichs:

Quote from @Alan Asriants:

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

just happened to my daughter in Vegas.. she normally works the Lux market so downpayment not an issue.. She took on someone from their gym who is a fHA buyer so they need closing costs.. Extra shows them a bunch of homes writes one up and seller will not pay a fee  they will give the closing cost but no fee.. Buyers have no money to pay my daughter. After much back and forth seller agreed to pay about 1/2 of a normal commish.. now she would have done it for free if she had to again based on the  relationship and how well she does in the industry but you can see how this will affect agents that really really need those commission to live and or stay in the industry..

Now for me and I did this back in the Carter years when rates where 18 to 20% and we had to do all sorts of financing magic.. I often just took my commissions on payments.. But again not every agent can affort to take payments for commish.. But it worked for me .. As I sold enough that I got full payment on to afford to do those types of deals and I can tell you I sold more RE than most in my market because I never let a deal fail because of downpayment issues.. Just a thought as you agents start to navigate the new rules.

 We will certainly have to start getting creating especially with low down payment buyers. I am seeing that the 2% buyer commission is more and more of a standard now. 

I'm worried that agents commissions are going to be cut drastically as people refuse to pay what they use to. Higher volume will work better in the future, even at a discount...

Commissions in Scotland are one percent.

[Jay Hinrichs]

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Jay Hinrichs:

Quote from @Alan Asriants:

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

just happened to my daughter in Vegas.. she normally works the Lux market so downpayment not an issue.. She took on someone from their gym who is a fHA buyer so they need closing costs.. Extra shows them a bunch of homes writes one up and seller will not pay a fee  they will give the closing cost but no fee.. Buyers have no money to pay my daughter. After much back and forth seller agreed to pay about 1/2 of a normal commish.. now she would have done it for free if she had to again based on the  relationship and how well she does in the industry but you can see how this will affect agents that really really need those commission to live and or stay in the industry..

Now for me and I did this back in the Carter years when rates where 18 to 20% and we had to do all sorts of financing magic.. I often just took my commissions on payments.. But again not every agent can affort to take payments for commish.. But it worked for me .. As I sold enough that I got full payment on to afford to do those types of deals and I can tell you I sold more RE than most in my market because I never let a deal fail because of downpayment issues.. Just a thought as you agents start to navigate the new rules.

 We will certainly have to start getting creating especially with low down payment buyers. I am seeing that the 2% buyer commission is more and more of a standard now. 

I'm worried that agents commissions are going to be cut drastically as people refuse to pay what they use to. Higher volume will work better in the future, even at a discount...

Commissions in Scotland are one percent.

I went the other way I was selling very tough to sell Land in Northern Ca. national forest areas (Mendocino) my fee was 10 to 20% and sometimes higher.. these properties are common in the West.. where you have private ownership surrounded by National Forest lands.. Very common to be a 20 to 40 mile dirt road one way and then you basically needed to be VERY good with maps to even find them.. this was Pre google earth or GPS.. I had to use USGS quad maps and my eyeballs.. There are land specialist that sell these types of properties .. However 99% of realtors cant do it and wont even try.. So we never put anything on MLS it was a waste of time.

[Alan Asriants]

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Jay Hinrichs:

Quote from @Alan Asriants:

Quote from @John Clark:

Quote from @Alan Asriants:

Quote from @Greg Kasmer:

Alan - How would you suggest to approach this from an investor standpoint? I have one agent that typically scans/research residential opportunities for me and another that does multifamily. I always stay with/honor any deal they bring to me. Would that dynamic be possible in the future?

 IN PA we have Exclusive and Non Exclusive Buyer Contracts. 

Exclusive contracts are timed contracts and whether or not the agent "bring" you the deal then you still owe a commission.

Non Exclusive are property based and more likely what is going to work best for you. You can stipulate in the contract specific property addresses or properties introduced to you by that agent for a given time frame. 

New contracts wont be available until August. 

Things will get interesting if the agent insists on dual agency and getting paid on both sides. There’s going to be sellers suing their own agents for refusing to work with independent buyers.

 The people who really suffer from this are the low downpayment/first time homebuyers who used to get representation for free. They can barley scrape up a downpayment let alone any commission...

This "news" really just protects the rich more than anything. 

just happened to my daughter in Vegas.. she normally works the Lux market so downpayment not an issue.. She took on someone from their gym who is a fHA buyer so they need closing costs.. Extra shows them a bunch of homes writes one up and seller will not pay a fee  they will give the closing cost but no fee.. Buyers have no money to pay my daughter. After much back and forth seller agreed to pay about 1/2 of a normal commish.. now she would have done it for free if she had to again based on the  relationship and how well she does in the industry but you can see how this will affect agents that really really need those commission to live and or stay in the industry..

Now for me and I did this back in the Carter years when rates where 18 to 20% and we had to do all sorts of financing magic.. I often just took my commissions on payments.. But again not every agent can affort to take payments for commish.. But it worked for me .. As I sold enough that I got full payment on to afford to do those types of deals and I can tell you I sold more RE than most in my market because I never let a deal fail because of downpayment issues.. Just a thought as you agents start to navigate the new rules.

 We will certainly have to start getting creating especially with low down payment buyers. I am seeing that the 2% buyer commission is more and more of a standard now. 

I'm worried that agents commissions are going to be cut drastically as people refuse to pay what they use to. Higher volume will work better in the future, even at a discount...

Commissions in Scotland are one percent.

The market drives commissions. 

In a sellers market, buyer commissions are lower. In a buyer market sellers offer more incentives to get home sold

[Albert Hepp]

I'm curious how buyers handle determining buyer agent compensation up front. Specifically, if they want to buy the first home an agent shows them, I would think they wouldn't be ok with 2%, or maybe even 1%. Would you agree to 1%?

I know many buyers will go with the flow and not object, but I'm especially curious about the experienced investors and people who aren't afraid to rock the boat to save some money. Thanks

[Sreeram Reddy]

How a potential buyer will win with this signing of contracts before touring homes in PA ? Any benefit for potential buyers ?  I don’t see a benefit for potential buyer in this new process. 

Please explain.

[Russell Brazil]

Quote from @Sreeram Reddy:

How a potential buyer will win with this signing of contracts before touring homes in PA ? Any benefit for potential buyers ?  I don’t see a benefit for potential buyer in this new process. 

Please explain.

I'd generally say it's not a benefit to buyers. But it is what it is.

[Albert Hepp]

Quote from @Sreeram Reddy:

How a potential buyer will win with this signing of contracts before touring homes in PA ? Any benefit for potential buyers ?  I don’t see a benefit for potential buyer in this new process. 

Please explain.

The buyer now has the opportunity to negotiate a mutually agreeable amount of compensation for the services they want, when buying a home. If the buyer has already found the home on their own, then a reasonable amount of buyer agent compensation may be 1% for writing up the purchase agreement and managing through closing.

Before, the buyer didn't really have the opportunity, and the agents could avoid even talking about the buyer agent compensation. That is the benefit.

[Sreeram Reddy]

can you please explain with an example ?

[Alan Asriants]

Quote from @Sreeram Reddy:

can you please explain with an example ?

I get where you are coming from. 

If the buyer is responsible for the commission - you are now procuring a new cost that you didn't before - so no financial benefit on that end.

But it doesn't mean that there is no benefit whatsoever. 

Its likely that buyers will be more selective when choosing an agent because they now have to pay, and in the long run they will use someone more adequate, which can in turn help you.  

For example, in the past you may have used your cousin (who doesn't sell any homes regularly) to help you find a home, that could have bitten you in the behind because something came up or was overlooked in the transaction which ended up costing you more than you planned. 

now that you are paying, you are hoping whoever you are dealing with is qualified. So when issues come up, you know a professional is handling them, effectively costing you less. 

lots of people go with family members/friends because they didn't pay them. Sometimes it works out sometimes it doesn't

[Sreeram Reddy]

Thanks,

but there is no financial benefit to the potential buyer when we compare  'with agent' vs 'with no agent',  also this law does not make sense in my opinion at least to the buyer, even in the case where a potential buyer goes with an agent - the signing of the documents(like seller's property disclosure & exclusive buyer agency/agent contract)
even before touring the home does not make sense, the signing of the 
documents(like seller's property disclosure & exclusive buyer agency/agent contract(in this one , it is mentioned "Buyer will not enter into Buyer Agency Contract with another broker/licensee that begins before the Ending Date of this Contract.")) logically COULD ALSO BE done after touring the home and potential buyer decides to buy the home. This
exclusive buyer agency/agent contract is also restricting the buyer to only one agent until the contract ends which I think is unethical, the buyer also seems to have no right to choose how long(duration) the contract can be which I think is unethical too.  Please see below which is shared to me by an agent, please correct me if I am wrong.

also, what kind of issues can come up(as you mentioned) ? I am a still a potential first time home buyer, looking to buy my first home in PA.

[Albert Hepp]

Quote from @Sreeram Reddy:

can you please explain with an example ?

Example: An agent I know and like, who I have worked with before and I have found a home that I like and want that agent to show me. I tell my agent I'm willing to sign a representation agreement for $5000 if I buy that home, and the agent helps me with the purchase agreement and through closing. The agreement should last 4-5 days.

If I don't like that home, and I think I want to engage a buyer agent for more in depth services over a longer period of time, then I will entertain other buyer representation agreements, but I will not agree to over 2%, which is the maximum recommended by the Consumer Federation of America.

To be fair, if my needs required my buyer agent to show me 30+ homes, or preview them since I am out of town, or something else that took an extraordinary amount of the agent's time, I would consider more than 2%. But not for a typical purchase.

Also, remember that the buyer agent cost should be paid by a seller credit, so it isn't additional money that you need to bring to closing. The buyer agent side of the commission has always been a part of agent involved transactions, so when those costs are reduced, both the buyer and seller benefit (buyer pays less, seller has a higher net/bottom line). This seller credit for buyer side commission isn't unusual as it is exactly like seller contributions to buyer closing costs that have been done for years.

Remember, you as a buyer can insist on a non-exclusive buyer representation or very short representation time period.

[Jay Hinrichs]

Quote from @Albert Hepp:

Quote from @Sreeram Reddy:

can you please explain with an example ?

Example: An agent I know and like, who I have worked with before and I have found a home that I like and want that agent to show me. I tell my agent I'm willing to sign a representation agreement for $5000 if I buy that home, and the agent helps me with the purchase agreement and through closing. The agreement should last 4-5 days.

If I don't like that home, and I think I want to engage a buyer agent for more in depth services over a longer period of time, then I will entertain other buyer representation agreements, but I will not agree to over 2%, which is the maximum recommended by the Consumer Federation of America.

To be fair, if my needs required my buyer agent to show me 30+ homes, or preview them since I am out of town, or something else that took an extraordinary amount of the agent's time, I would consider more than 2%. But not for a typical purchase.

Also, remember that the buyer agent cost should be paid by a seller credit, so it isn't additional money that you need to bring to closing. The buyer agent side of the commission has always been a part of agent involved transactions, so when those costs are reduced, both the buyer and seller benefit (buyer pays less, seller has a higher net/bottom line). This seller credit for buyer side commission isn't unusual as it is exactly like seller contributions to buyer closing costs that have been done for years.

Remember, you as a buyer can insist on a non-exclusive buyer representation or very short representation time period.

Be interesting to see what agents are willing to do this and other agents that think its a time waster or time suck to work for a client like this.. I am fairly certain the top producer will not work this way..