All Forum Posts by: Noah Bacon

Now that August 17th has passed, and the new NAR Settlement is in effect, big changes for consumers on both sides of real estate transactions are being felt across the nation. If you haven't bought or sold any real estate recently, the new rules in play may leave you wondering how this may impact your financial responsibility in the transaction. 

The two biggest changes that went into effect over the weekend are:

1. Buyers must now enter into a contract with an agent before that agent can show them any properties

This change may or may not impact you at all, as roughly 20 states already had in place a requirement to have a signed buyer representation agreement with an agent before showing any homes. Even in the 30ish states that did not require an agreement, it is still common practice for many agents to have a buyers agreement in place before showing homes. Not a major shift, but still worth highlighting. The bigger change is around commission.

2. Listings with advertised offers of compensation are no longer allowed in an MLS

Prior to this weekend, NAR members who listed properties included offers of shared commissions within their local MLS. Historically, the exact amount of shared commission varied, but this led to most sellers paying about 6% of the home's sales price, with 3% going to their agent and 3% to the buyer's agent. Boiling it down even further, having the seller pay both agents commissions was common practice until this weekend.

Now, sellers and their listing agents can still offer to pay a buyer’s agent's fee, BUT that must happen via outside negotiations. This means that in some transactions, sellers pay nothing to the buyer’s agent fee at all, putting the financial burden fully on the buyer instead. Buyers could then negotiate and pay the buyer agent’s fee out of pocket or go without an agent, managing their transaction on their own. So what can buyers, sellers, and agents expect with the changes? 

Buyers

Focusing on the changes around showing properties, t is more crucial than ever to vet your list of agents up front before even considering touring a home now that you are required in every state to sign a buyer representation agreement. Developing a relationship and understanding the skillset your agent will bring to the table is vital upfront and puts even more responsibility on the buyer to have selected an agent that will get them to the finish line. 

With the new commission laws in place, some buyers going directly to the listing agent in lieu of having their own buyers agent because they’ve heard that they will need to pay their agent directly out of pocket and they just don’t have the extra funds, with high interest rates and home prices in todays market. Buyers agents may start to get more creative on the payment of their services by offering a la carte pricing, flat fees, and hourly services to better fit their buyers budgets. 

Sellers

With the changes, sellers will technically now have the choice whether they want to offer any compensation to the buyer's agent...or none at all. This does not mean that sellers have just magically been gifted all of the power over negotiating the buyers agent commission, and will net more after the sale of their home. Seller should not be surprised if buyers will now make lower offers than what is listed on the MLS, factoring in the cost of paying for their buyer agent's commission. Seller should also expect a smaller pool of buyers to their listing if they are unwilling to pay a portion of the buyer's agent fee. If you are a seller willing to pay portion or all of a buyer's commission, make sure your listing agent knows that and is aware of how much. Your listing agent can let other agents know off the MLS that you're open to negotiating and can increase the pool of buyers willing to negotiate.

This change has already caused a lot of buyer hesitancy, seller's with inflated expectations, and a whole lot of agents wondering how this will impact their transaction volume. 

Have you already seen big changes in your market over the weekend with the new NAR rules in effect?

Wow, that's an insane jump. This is a safe place for my CO investors to vent.

In all seriousness, the dramatic policy increases I have seen numerous investors stomach right now is making us all scratch our heads and wonder what alternative options are out there. It's no surprise to me that CO is in the top ten most expensive states due to wildfires and hail, but the steep increases are just an absolute deal killer completely out of our control.

Are you going to look in a different state with the notice, or continue to buy in CO?

 Hi Dylan!

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 Great question! We have built the platform internally and do not use an external forum software. 

Hey Luke!

Great questions, and awesome job having your downpayment ready!

1. I wouldn't be completely turned off from the idea of buying a condo/townhome as your primary. I bought a condo in 2021 and a townhome in 2022, both as primary's in Colorado Springs. I was priced out of small multifamilies, and single family homes did not make sense to rent out with a higher price point. What I have learned very quickly owning these properties is that you can make these work on paper to convert them into rentals when you do your analysis today, but HOA increases are unexpected and completely out of your control. My townhouse has had subtle increase YoY ($15-$25 increases), and my condo HOA fees jump over 100% YoY basically crushing my cashflow. Numerous insurance providers have pulled out of CO in the last few years and I know a lot of investors (myself included) hurting right now! Cashflow aside, I have still seen great appreciation and I'm sure Boulder will continue to have a strong market if/when rates start to come down.
2. Shameless plug to @Dave Meyer's Start with Strategy, but I wish I had read this book before I started investing. (Thanks for releasing it 3 years late, Dave🙄). This will show you various strategies and the risk tolerance associated with each of them. If you haven't checked out house hacking yet, I could not recommend it more highly especially if you are looking to get into your first primary. Many of us started out using this strategy, and have continued to implement it with numerous nuances: House Hacking with an STR in your basement, renting by room in a SFH, and most traditionally in a small multifamily property where you take one unit to yourself.

Sorry for the confusion! It is updated now 😁

Thank you for letting me know, @Becca F. Are you still experiencing the issue? We are aware of the Ad Pop up concern.

I have connected with Bill and am working on identifying the email issue right now, and think it is an isolated problem. 

 Additionally, are any of the emails landing in your "Spam" folder?

Recently I've seen a massive increase of homeowners rolling up their sleeves and taking on DIY projects either on their primary homes or on their rental properties. Maybe money is tight, maybe it is the summer and people are feeling more inspired to make the recurring Home Depot runs, or maybe people are taking more initiative to round their skills on Youtube University. 

I am certainly guilty of biting off more than I can chew when it comes to taking on projects that I was not skilled enough to properly move forward, and have used professionals on a few of the projects to get me to the finish line. There are things I know I will never look at doing myself: plumbing, electrical, roofing, installing hardwood flooring, bathroom remodel, and I'm sure many more! At times, I wish I hadn't even touched certain things as it cost me more to hire out a contractor to fix my mistakes, and other times I have saved myself a few hundred dollars on maintenance costs. My biggest mistake was thinking that I could lay down new LVP on the main floor of my last house hack, 1 month out of shoulder surgery and I quickly pivoted to a local professional. My inability to understand the time it would take doing it myself at the pace I was moving the project forward set me back a few weeks at best; slowing down the turnover and listing it later than I expected. 

What are some projects you have been able to move forward that you did not expect you could do?

AND

What are some projects you have turned over to professional help after you realized you couldn't do it?