The National Association of REALTORS® has been in the headlines recently with a legal settlement that changes how REALTORS® and their buyer clients will do business together. We believe there are positive aspects of the settlement that we’re happy to see implemented, but also some consequences that buyers should be aware of—particularly for military home buyers.

We’ll be covering three major changes that the settlement brings in this newsletter and the following two in order to educate our clients on how the settlement affects them.

The Buyer Broker Agreement—A New First Step for Home Buyers

Traditionally, the buyer & agent relationship was informal & straightforward with minimal preliminary steps—a buyer finds a home they want to see, they contact a REALTOR® to view the home, and the REALTOR® sets up a showing with the buyer.

The NAR settlement introduces a new requirement that buyers and their agent enter into a formal Buyer Broker Agreement before the home buying process begins (typically, beginning with a request to view a home). The agreement will clearly explain any buyer’s out-of-pocket expenses for compensating their agent in the event that a seller doesn't offer to fund the buyer agent’s compensation from the proceeds of the home sale.

This new process may catch some buyers by surprise—what was once a simple process of contacting a REALTOR® to view a home now introduces an additional step that enters a buyer into a contract with their agent before any homes are shown.

Consequences of the Settlement

While REALTORS® are happy that the settlement provides an opportunity to vet potential buyers and clarify how they’re compensated, it does introduce (perhaps) unintended consequences for buyers.

By requiring buyers to enter into a contract with an agent as a first step, it locks a buyer into a formal agreement with that agent, limiting their freedom to “shop” for other REALTORS® who may better meet their needs or personality. Fortunately, buyers and agents can agree to “short-term” agreements for as few as 7 days, or limited to a handful or showings, or showings in a particular neighborhood. If the buyer and agent don’t work out, a brief initial contract means the buyer is free to shop for another REALTOR®.

NOTE: New Oklahoma laws as of November 1st, 2024 will default contracts to 60 days if no date is provided in a contract, and no contract can exceed 12 months.

How Buyers Can Be Prepared

When starting your search for purchasing a home be prepared to…

• Find your agent BEFORE finding a home. By having a buyer consultation with your REALTOR® before finding a home to view, buyers can overcome the initial hurdle of understanding & signing a Buyer Broker Agreement when time is of the essence to see a home.
• Use the buyer consultation an opportunity to learn about the financial ramifications involved in purchasing real estate—including the cost of the loan, title insurance, mortgage insurance, property insurance, county & recording fees, property taxes, and deferred maintenance—all of which should be part of an experienced & professional REALTOR®’s initial buyer consultation.

REALTORS® will be using these requirements set forth in the NAR settlement to more intently vet potential buyers. The benefit to buyers is an opportunity to clearly understand the detailed financial aspects of buying a home BEFORE jumping into the most exciting part of the process—looking at homes!

In our following two newsletters, we’ll continue to discuss the ramifications of the NAR settlement—including changes in buyers’ ability to finance agent compensation, and the settlement’s major impacts on military homebuyers’ VA benefits.

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