How Updated Rules Impact the Home Buying Process

What are the Changes?

As of August 17, 2024, two major changes impact how consumers buy and sell homes:

1. Buyers must sign contracts with an agent before touring properties.

While signing an agreement is not technically required, some agents may not be willing to show buyers potential homes until this is done, according to Realtor.com. This agreement clarifies how the agent will be compensated and notes that if the seller does not cover the agent's commission, the buyer may be responsible for that payment. While some states already have this requirement, it now applies to all members of the National Association of Realtors, which includes about 1.5 million agents across the United States.

2. Agents are not permitted to advertise commission fees.

Sellers’ agents can no longer mention commission fees for buyers' agents on multiple listing services (MLS), which are used to list and find homes and facilitate transactions. This change aims to increase transparency and ensure that homebuyers and their agents discuss and agree upon compensation terms with one another, ideally during the signing of a representation agreement as listed above.

NAR President Kevin Sears told CNN that the changes “help to further empower consumers with clarity and choice when buying and selling a home.”

What Changes Buyers Can Expect

Whether you’re about to start your home buying journey or have already been exploring the market for a few months, there are several key changes you can expect to encounter during the process:

You Must Sign a Contract Before Touring Homes

While a contract must be in place before you can tour a home with an agent, the terms of that contract are flexible. Engagements can range from one day, one property tour, or any terms you and your agent agree upon, so long as it’s prior to the showing. Remember, some agents may be hesitant to show you a home without a signed contract.

However, Realtor.com states that you don’t need a written agreement if you’re simply interviewing a potential buyer’s agent, or talking to a listing agent who is holding an open house.

Greater Clarity on Costs

With the new commission disclosure requirements, buyers will have a clearer understanding of the costs associated with their purchase.

Expect Additional Negotiations

Since sellers' agents can no longer advertise commission fees for buyers' agents on multiple listing services, buyers and their agents will need to discuss and agree on compensation terms before viewing properties, whether that compensation takes the shape of a flat fee, specific share of the purchase price, or other agreed-upon terms.

Reasonable Commissions are Now Granted with VA Loans

If you have a loan through the U.S. Department of Veterans Affairs program, you should anticipate some changes as well. Previously, VA borrowers were prohibited from paying any agent commissions. However, starting August 2024, the VA will permit borrowers to cover certain "reasonable" commissions, making it possible for them to pay agent fees under specific conditions. Click here to be directed to a local MLO or dial 866-351-5353.

What Sellers Can Expect

Like buyers, sellers should be prepared for several key shifts in how they handle real estate transactions because of these recent changes:

Sign a Contract Before Touring Homes

Like buyers, sellers are required to sign a written agreement with their agent before the agent schedules property tours with potential buyers.

Unable to Advertise Listing Commission Fees

Sellers will need to adapt to changes in how they manage and disclose agent commissions, as buyers will participate in negotiating these terms from the outset.

Expect to Negotiate More Often

Sellers will have the freedom to determine whether they’re prepared to offer compensation to the buyer’s agent. This may reduce out-of-pocket expenses for sellers, but could provoke increased sale negotiations.

Potential Decrease in Interested Buyers

As a seller, you may encounter a reduction in your buyer pool if you elect not to contribute to the buyer’s agent fee; agents may be less inclined to schedule a tour of your property.

How Changes May Impact Home Affordability

While these changes aim to enhance transparency, they bring new financial considerations for buyers, influencing purchasing power and home affordability. To navigate these changes effectively, connect with a Mortgage Loan Originator from Fifth Third Bank to discuss your goals, current position in the home buying process, and available financing options.

With the right assistance, you can confidently embark on your home buying journey and make the most of the new regulations. Have any questions? We're here to help! Click here to speak with a local MLO or call 866-351-5353.