Buying a home is commonly an individual’s most significant purchase. A buyer will often turn to a real estate agent for guidance during the home buying process, particularly because historically the seller pays the buyer’s agent’s 2.5%-3% commission.
But changes are coming that may put the buyer on the hook for that commission.
The National Association of Realtors’ (NAR) recent settlement of a lawsuit, where buyers brought antitrust claims against NAR and its Realtors, may change the way real estate agents and in particular the buyers’ agent are compensated.
No longer can the multiple listing service (MLS) listing of a house for sale indicate that the seller will pay the buyer’s agent commission nor how much the commission is. That will become a negotiating point between the agents, seller, and buyer.
This means that in a hot market like the DMV, where there are often multiple offers, a seller may choose the contract that does not require the seller to pay the buyer’s agent a commission. It would possibly save the seller 2.5%-3% of the selling price. In many local areas where $1 million-plus asking prices are commonplace, this could mean the buyer would have to come up with an additional $25,000 to $30,000 to cover the commission.
But that doesn’t mean a buyer should go it alone just to avoid the fee.
An Attorney May Be a Better Option
Real estate attorneys who are skilled in drafting and negotiating purchase contracts and in the title and settlement process, could be a great alternative to the buyer’s agent. An attorney can offer their services for a fraction of the commission fee the agent would charge.
The NAR settlement is coming at a time in the housing market when buyers may be asking whether they need all the services a real estate agent offers. Consider:
- In today’s market, the buyer has many tools available at their fingertips that were previously only available to real estate agents: Zillow, Trulia, Redfin, and others internet apps mean the buyer often doesn’t need a real estate agent to find available houses.
- Sometimes a buyer will know before an agent when a house comes on the market. If the buyer zeroes in on a home, they have a variety of research tools to determine comparable sales to guide them with their asking price.
- The buyer probably has also sat down with a mortgage company or mortgage broker to figure out how to finance the purchase.
What are not at the buyer’s fingertips, but are arguably the most important pieces of the home buying process, are the purchase contract, and the title and settlement process. This is where an attorney may be a better choice than a real estate agent.
For a fraction of the real estate agent’s commission, a residential real estate lawyer can draft the purchase contract, negotiate the contract, review the title to the property and all the closing documents, and guide the buyer through settlement.
It’s Not One-Size-Fits-All
For a buyer who needs to tour 20 homes before deciding on a house or is new to the area, then a real estate agent may be a good investment. There are certainly circumstances where banking on an agent’s knowledge of the market may be worth the price of the commission.
However, if you are a buyer who knows what you want, but needs assistance with the purchase contract, then before you hire the real estate agent whose fee is either paid by you or by a seller who’s not aligned with your interests, consider first talking to a real estate lawyer. It could save you a lot of money.
