New rules are now in effect for all licensed Realtors nationwide. The results of a lawsuit and settlement by the National Association of Realtors affects most, if not all, members and member MLS systems across the country. Some changes are not noticeable to the public, others are significant changes that cannot be missed. That was the intent of the settlement. New rules for real estate sales to create significant change.
New rules to real estate practices for buyers
The most obvious practice change for buyers is going to be the requirement for a signed agreement. Before looking at any property, a buyer is going to have to sign an agreement committing to pay the buyer’s agent. They can sign a buyer agency agreement or a compensation agreement.
The buyer agency agreement commits the buyer to an agent and the agent to the buyer for a period of time specified in the contract. In Colorado, this form creates a Buyer Agency relationship or Transaction Broker relationship. This has been in practice for years in Colorado. However, now it will specify how much the buyer will pay the agent. Or, if specified in the buyer agency agreement, how much the seller will be asked to pay the agent. Of course, the seller is not obligated to pay, but the buyer is.
If the buyer is not ready to commit to the agent, the buyer can sign a compensation agreement instead. This form commits the buyer to pay the agent for their services. It doesn’t commit the buyer to the agent or the agent to the buyer for any longer than to takes to fulfill the services agreed to. In Colorado, this would be a Transaction Broker relationship. Again, if specified in the agreement, the seller can be asked to pay the agent. The seller is not obligated to pay, however the buyer is.
In practice, this means every potential buyer must sign a contract agreeing to pay their agent before looking at a single home. Every buyer will sign that agreement without knowing if the seller of the home they will eventually fall in love with will pay their agent or if those funds will have to come directly out of their pocket. This will generally become a part of the offer and negotiations.
Real estate practice changes for sellers
Not much will change for sellers. A seller agency agreement has always been required in Colorado. This agreement specifies how much the seller will pay both the listing agent and the seller’s agent. There may be more conversations between the seller and their agent about how they want to handle the buyer’s agent’s commission but the seller can still pay the buyer’s agent just as they have in the past.
New rule changes not as obvious to the public
Any commission the seller is offering to pay the buyer cannot be in the multiple listing service, MLS, or in services related to the MLS or our Realtor associations.
What hasn’t changed
Commissions. Commissions are negotiable and determined by agents and the clients they work with just as they have been.
Relationships. The working relationships you can have with your Colorado real estate agent has not changed.
Ethics and Morals. The ethical behavior of your Realtor has not changed. They will continue to work in the client’s best interest and follow the Realtor Code of Ethics.
With the exception of more discussion regarding the pay of the buyer’s agent, your real estate transaction should not be any different. Your Realtor will be working hard to look out for your best interest from start to finish.
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