2024 New Realtor Regulations – in effect 8/17/24 (just the basics)
As you’ve likely heard over the last year or so, the changes to how we do business took effect on August 17th, 2024. I’ll do my best to give you a relatively “short” breakdown on the most pertinent aspects of the new regulations. (Note: My initial attempt at a short breakdown was three pages long, so you may have questions beyond what is addressed below):
Open house visitation
Prospective buyers – if not accompanied by an agent representing them – are now required to fill in a form, titled OHNA-SI (Open House Non-Agency Sign In), before touring a home for sale. If you’re not working with an agent, this should be the only form a listing agent has you fill out when entering a home. If you feel comfortable having that agent represent you further in the possible purchase of the home, they may then ask you to fill out forms “PSRA” or “BRBC.”
Working with A Buyer’s Agent
In order to show you property or work on your behalf, realtors are now required to have you sign one of two forms before doing so:
~ PSRA (Property Showing and Representation Agreement): This form is used in the short-term to indicate that the buyer is working with a specific agent for a specific set of properties (up to 3), and only for a period of 30 days. This is a Non-Exclusive agreement, meaning that there must be agent involvement on the specified properties for the agent to be compensated. For the record, agent involvement means, 1) Buyer physically entered and was shown the property by the agent, 2) Agent submitted a signed, written offer to obtain the property on behalf of the buyer, or 3) Agent performed a market analysis related to the property or reviewed property specific documents. (An agent who simply sends you listings via email is technically NOT working for you until one of these three criteria has been met.) The PSRA is commonly referred to as the “dating form” – it’s a short-term commitment to the agent.
~ BRBC (Buyer Representation and Broker Compensation Agreement): This is a longer-term agreement with a time limit of 90 days. However, it can be extended by agreement between the buyer and agent for an additional 90 days – for a total of 180 days. After 180 days, a new form must be filled out by the buyer and their agent. This agreement can be Non-Exclusive (as mentioned above), or Exclusive. If the agreement is exclusive, the agent is entitled to compensation if the buyer acquires any property during the representation period – even if another agent is also entitled to be paid for representing the buyer. In other words, make sure you don’t sign two BRBC agreements with two different agents that overlap each other. Either that or grab a bag of popcorn and watch the fight. A buyer may cancel this contract with written notice within 5 days of receipt by the agent if the agreement is Non-Exclusive, but if it’s an Exclusive agreement the cancellation takes effect after 30 days. The BRBC is commonly referred to as the “marriage form” – it’s a longer-term commitment to the agent.
Buyer’s Agent Commission – Who Pays?
~ The buyer’s agent’s commission is negotiable and is initially set between the buyer and their agent, per a signed agreement using either the PSRA or BRBC forms. This occurs before any offer is made to purchase property.
~ A buyer can choose to pay their agent directly per either of the above two agreements – or – within the BRBC form there is a check box to indicate that the buyer either doesn’t have sufficient funds to pay their agent, or that the buyer is using a loan product that doesn’t allow for a buyer to pay compensation to their agent. This is then submitted along with any offers to purchase property.
~ If the buyer doesn’t have the funds to pay their agent, they can request a concession in an offer to the seller of a property in order to cover their agent’s commission. However, if a seller does offer a concession for this – it is negotiable and cannot be more than, or in addition to, what the buyer and their agent have already agreed to in the BRBC form. Thus, if the buyer and their agent negotiated a 2.5% commission, but a seller only offers 2% concession towards the buyer’s agent, the buyer is responsible for paying their agent out of their own pocket to cover the .5% difference.
~ Seller concessions to pay the buyer’s agent are negotiable and a contingency to the sales contract. If a buyer and seller can’t agree, it is possible for the buyer to ask their agent to renegotiate their commission to make the deal go through.
Likely Outcomes
It will probably take a year or more to see where this all ends up, but we expect that most sellers will choose to offer concessions to pay for or offset buyer’s agent’s commissions. This is mainly because offering to pay the buyer’s agent commission is an inducement to have the seller’s property shown by other agents. A seller who doesn’t offer concessions may end up get far fewer showings or offers as a result. (Not saying this is “right” – but it’s the likely outcome.)
~ Offers submitted by buyers who are willing to pay their agents out of pocket may be more likely to get their offers accepted in a multiple-offer situation.
~ Sellers who aren’t considering offering concessions may simply respond to any offers that request concessions by counter-offering a higher sales price to offset the buyer’s agent’s commission – even upon receipt of a full-price offer.
~ Alternatively, buyers may end up lowering their offers automatically by the percentage owed and agreed to with their agent in the BRBC or PSRA forms.
~ There will be some interesting conversations between buyers and their agents. In order for the buyer’s agent to receive a commission, they MUST have an agreement with the buyer where that commission is spelled out. If the buyer submits an offer on a property where the seller doesn’t offer concessions, yet the buyer decides they don’t want to pay their agent out of their own pocket (essentially asking their agent to work for free) – this could lead to a lot of cancelled deals and animosity between agents and their clients.
In the end, these changes – while complicated – are better for the buying public, as it brings the buyer’s agent’s commissions to the forefront. Buyers can now negotiate their agent’s commission (rather than it automatically being paid for by the seller) – so the value of a buyer’s agent needs to be more transparent and obvious going forward. Agents who go the extra mile will be paid better, while agents who do the bare minimum will receive less. Just the way it should be!
If you have any further questions about these new rules, feel free to give us a call – we’ll be happy to explain further.