February 2, 2025 | 714-336-0394 | Scot@CampbellRealtors.com | Broker of Record – Coldwell Banker-Campbell Realtors
NAR’s recent settlement has led to several changes related to broker commissions that benefit both buyers and sellers.
The California legislature passed Assembly Bill 2992 as a result of the NAR settlement, and it went into effect on January 1, 2025.
As a home buyer, you have a wide range of choices when it comes to the agent you hire to help you purchase a home.
Not all buyers need the same level of service, and not all Buyer Agents can offer the level of service you will receive if you hire a Top Individual Agent in your market area.
Buyers benefit from the New Rules because they can select the Buyer Agent that best meets their needs with a maximum commission rate determined by the Buyer (not the Seller).
Agents who are REALTORS® are a trusted source of advice and stand ready to help you navigate this complex process and make the choices that work best for you.
Here is what the settlement and AB 2992 means for home buyers:
- Buyer Agents cannot show / tour properties with buyers until a Buyer Representation has been signed by the Buyer Agent and the Buyer.
- The amount of the Buyer Agent Compensation will be determined by negotiation between the Buyer and Buyer Agent and memorialized in a written Buyer Representation Agreement.
- Since the Buyer must agree to the amount of the commission being paid, it is possible that commission rates will be lower for some Buyer Agents.
- The seller still has a choice of offering compensation to Buyer Agents, but the offer of compensation will not be an irrevocable commission published in the Realtor MLS.
- If the Seller does not offer Buyer Agent Compensation, the Buyer will be required to pay the commission in escrow per the terms of the Buyer Representation Agreement.
- If the Seller refuses to pay the Buyer Agent Compensation, this will reduce the amount of available funds for down payment and closing costs (which could result in a reduction in the maximum price the buyer can pay for the home).
- If the Seller pays the commission, this will maximize the number of buyers who can afford to purchase the home.
- When your Buyer Agent contacts Listing Agents for showing instructions on the homes you want to see, your agent should verify the Seller’s willingness to pay compensation to your Buyer Agent.
- The new Best Practice in the industry is ask the Seller to pay the agreed Buyer Agent Compensation in the Residential Purchase Agreement.
- Your Buyer Representation Agreement can be written to incentivize your Buyer Agent to find Off-Market homes for your consideration.
- If you hire a Buyer Agent who is skilled in finding Off-Market homes, you have a much better chance of purchasing a home that meets your needs in a location you love. Off-Market homes often sell for less money than homes published in the Realtor MLS.
The settlement practice changes went into effect August 17, 2024 and AB 2992 went into effect on January 1, 2025.
Here is what the settlement doesn’t change:
- Buyers still want to purchase homes, Sellers still want to sell homes.
- Agents who are REALTORS® are still here to help you navigate the process of buying a home and are ethically obligated to work in your best interest.
- REALTOR® still abide by the REALTOR® Code of Ethics and have clear and transparent discussions with you about compensation.
- Payment of commissions can be handled in such a way that effective buyer purchasing power remains the same.
- In most transactions, the seller pays the Buyer Agent Commission in escrow as has been done in the past.
- Buyer Agents will still work hard to find you a your home, and perhaps harder if you authorize him/her to locate Off-Market homes for your consideration.
- With your consent, the agent you hire can act as a Dual Agent representing both the buyer and seller. This will likely be the case if your Buyer Agent finds you an Off-Market home.
When selecting a Buyer Agent to work with, be sure ask questions about Buyer Agent Compensation, Experience, Education, and ability to locate Off-Market Homes. Ask what information sources and skills the agent intends to use to locate both on-market and off-market homes for your consideration.
Final Thoughts
Finding a home doesn’t have to be overwhelming. By understanding the key steps, you can navigate the process confidently and maximize your home’s value.
Here is a link to my Home Buyer Guide with all the details on the process: https://scotcampbell.com/home-buyer-guide
Important tip: Do not assume listing your home with a big “team” or “group” will result in you working with the most knowledgeable and experienced agent. While the “teams” tout their success in closing many homes and being #1 (in the state, country, or universe), the fact is they have many realtors who give “credit” to just one “team leader”. When listing your home, you may speak to that team leader initially, but your file will most likely be passed to a junior associate for the remainder of the transaction. The junior associate will have nowhere near the education, experience, and skill to be found in a top individual Realtor working in your market. A top individual agent will have assistants that help with photography, marketing, and transaction paperwork, but the important transaction tasks will be handled by the Realtor you hired!