New real estate regulations take effect

By Matthew Trudel

In August we have just had some significant changes to how we can do business as REALTORS®. This applies to every REALTOR® and real estate company actively practicing brokerage across the state. Some of these changes were minor and we don’t need to really discuss those in depth.

One example would be the new requirement for the Flood Hazard disclosure for all properties including just land. There are some significant changes about how we can work with sellers and buyers. These are the things that I really want to share with you and explain how it might affect buyers and sellers.

Let’s first talk about buyers and buyer’s agreements. A buyer’s agreement is a written document that is an agreement between an agency and a buyer. This explains what type of property the buyer is looking for and more importantly how the agency is going to be compensated and how much they will be compensated. We have had buyer’s agreements around for years, but they were not required. Now they are required before you can show a buyer any listing. The exceptions to this rule are if the property being shown is the REALTOR’s listing that they have listed for sale, or for any open house. Basically, if a buyer finds a house online that they like and would like to see it, they have only two options. Option 1 is to call the listing agent to set up a showing. Option 2 is to enter into a buyer’s agreement with a REALTOR® and have them set up a showing.

Option 1 is something I think most people should avoid. Going directly to the listing agent does not provide you with any representation. The listing agent is looking out for the seller and their best interest. The listing agent cannot or should not be advising a buyer who is not a client about negotiations, representations, value, and many more things. In addition, the listing agent is likely going to make double the commission and remember they are not looking out for the buyer’s best interest.

Option 2 is a much better plan that will provide you with representation from a professional REALTOR® that will be looking out for your best interest. This also allows you to negotiate exactly what the compensation will be for the service that the agency is providing. If you negotiate a buyer’s agency fee of 2.5 percent of the purchase price and the property you want has a listing agency that is willing to pay 3 percent to any broker who brings a buyer, then you should get that extra ½ percent as a credit toward closing costs. I would also suggest entering into a buyer’s agreement before you find that perfect home. Remember to interview a few REALTORs to find the right fit with a realtor with plenty of experience.

Let’s switch gears and talk about sellers and how these changes affect them. REALTORs are no longer allowed to post on any listing the amount or percentage that the agency is willing to compensate another agency who brings a buyer that is their client. Sellers can really negotiate what that amount will be or if there will be any compensation offered. Every real estate company has their own policy about how they are handling these changes. Now that buyers are going to likely have their own representation from another agency, the question that is now being asked is should the seller be responsible for paying that other agency? Why wouldn’t each party pay their own REALTOR® respectively? There are many reasons why it is easier for agencies to share the commission that the seller is willing to pay, and I can’t get into all of them. A lot of it has to do with financing and closing cost limits for buyers.

These changes just went into effect and like with any changes, there will be a learning curve as we get used to working within the new guidelines. It encourages buyers to obtain representation and a clear understanding of what the compensation will be. In the past I think this was sometimes not really clear to buyers and probably because the real estate agent did not properly explain the whole process. Sellers should hopefully have a better understanding of the compensation they are paying and that it might be negotiable depending on the listing agency’s policy. This is also why it is a good idea to talk to a few different agencies regarding what options each might offer.

This article was written by Matthew Trudel, Owner and Broker of Five Star Realty in Windham. Call him at 207-939-6971 or email him at: matt@fivestarrealtymaine.com for all your real estate needs. <