If you are planning to buy a home in the Bay Area, the National Association of Realtors settlement introduces changes that directly affect how you work with your real estate agent. Here is what you need to understand before you start touring homes.
The Biggest Change: Buyer Agency Agreements
The most significant change for buyers is the new requirement to sign a written buyer agency agreement before an agent can show you homes. Previously, many buyers would casually tour open houses and work with an agent informally before committing to a representation agreement. That is no longer the case.
A buyer agency agreement specifies the services your agent will provide, the duration of the agreement, and crucially, how your agent will be compensated. This compensation must be clearly stated as a specific amount or percentage, and it cannot be open-ended.
Who Pays Your Agent Now?
This is the question every buyer is asking. The answer: it depends. There are several scenarios:
- The seller offers compensation. Many sellers, especially in competitive markets like Silicon Valley, will continue to offer buyer agent compensation to attract the widest pool of buyers. If the seller's offered compensation meets or exceeds your agreement with your agent, you pay nothing additional.
- You negotiate it into the offer. You can request that the seller pay your agent's compensation as part of your purchase offer. This is similar to asking for closing cost credits.
- You pay your agent directly. In some cases, particularly with less motivated sellers, you may need to pay your agent's fee yourself, either at closing or through your mortgage financing.
What This Means in the Bay Area
In practice, the Bay Area's competitive dynamics mean that most sellers will continue to offer buyer agent compensation because it is in their interest to maximize buyer participation. A seller who refuses to offer compensation risks shrinking their buyer pool, which can suppress the final sale price by more than the commission saved.
For buyers, the key takeaway is to have an honest conversation with your agent about compensation before you sign a buyer agency agreement. Understand what you are agreeing to pay, under what circumstances, and how different scenarios might play out.
Choosing the Right Buyer's Agent
The settlement actually elevates the importance of choosing a skilled buyer's agent. When compensation is no longer automatic, the agents who thrive will be those who provide clear value: market expertise, negotiation skill, and the ability to guide you through the most complex real estate market in the country.
Do not let commission concerns drive you to go unrepresented. In a market where homes routinely sell for two to five million dollars, the guidance of an experienced agent can save you far more than any commission cost. I am happy to walk you through how these changes affect your specific situation.