There are changes coming to the real estate industry, and we at Philly Home Girls are thrilled! Here’s what you can look forward to:
1. Even More Clarity around Commissions and Fees
Starting August 14th, your agent will offer more conversations around commissions, fees, and types of agent representation. This will lead to more meaningful negotiations and better outcomes for both buyers and sellers.
Opportunity: Sellers may price their home for less by excluding compensation for the buyer's agent. This could help it reach a wider array of buyers, and allows buyers to choose to cover their agent’s compensation vs. bundling into the home’s price.
2. Leveling the Playing Field
The MLS will no longer disclose offers of compensation to the buyer’s agents, intending that all sellers have equal opportunities to attract buyers. However, the exact outcomes will vary based on market conditions. It's important for buyers and sellers to consult with their real estate professionals to understand how these changes might affect their specific situation. This does no
Opportunity: Sellers who have historically made little to no effort to encourage buyers to hire a representative to protect the buyer’s interests exclusively will be considered as attractive as sellers who offer to include all or some of the buyer’s agent's compensation in the home’s price.
3. Potential Cost Savings
Buyers may save on long-term costs, like mortgage interest, if they handle their agent’s commission separately from the purchase price. Investors could increase that benefit with additional tax deductions when increasing their basis by their agent’s commission, potentially leading to larger depreciation deductions.
Opportunity: When buying a house that’s $300,000 with the buyer’s agent’s compensation included in that price, a mortgage of 5% down is $285,000. If that buyer pays their agent’s compensation as part of their closing costs, say at 3% or $9,000, then they may make an offer to the seller that’s 3% less and the seller’s bottom line is the same. Now 5% of $291,000 down will save interest on that $9,000 for 30 years, and the monthly payment at 7%, for example, is $57/mo ($2683/year) less than it would have been if the buyer’s agent compensation was included in the price.
Advanced transaction structuring can help buyers win bidding wars, save money, and avoid appraisal gap coverage while sellers can appreciate lower closing costs and avoid potential appraisal pitfalls.
4. Increased Consumer Confidence
Buyers will now need to sign a buyer’s agency agreement before touring a home. This ensures clarity about who represents them, the costs involved, and the services they can expect.
Opportunity: With a greater possibility of paying part or all of a buyer’s agent’s compensation, chances of being offered flat fee and discounted services are greater, and so is meeting dedicated, qualified, talented agents, who can save their clients time and money.
5. Enhanced Service
Before signing a buyer’s agency agreement, buyers may be more likely to meet and interview potential agents for a consultation in advance of touring a home for sale.
A consultation with an exclusive buyer’s representative may establish budget, timeframe, and financing, followed by a solid plan of action to achieve the buyer’s goal. With defined expectations, buyers can choose agents more carefully, leading to better service. Agents will have more time to focus on their signed clients and maintain a healthy work-life balance, which enhances quantity and quality of service.
Opportunity: Receiving more information and education about the home buying process in advance of house hunting gives contractually represented buyers a competitive advantage over a buyer who is not.
6. More Options
Engaging in deeper conversations and promoting transparency around the types of representation real estate agents offer can help clients find the right level of service that fits their specific needs and budget.
Opportunity: For instance, understanding that a transaction licensee's role is primarily to document transactions might save clients the cost of hiring an attorney. Similarly, choosing a designated agent provided by the seller’s brokerage can help avoid dual agency conflicts, ensuring each party has a dedicated advocate. When a transaction is especially cordial, dual agency can be a practical option for a streamlined transaction, provided all parties trust that the arrangement suits everyone's best interests rather than competing interests.
The Bottom Line
These changes usher in greater transparency, potential cost savings, and enhanced services in the real estate market. At Philly Home Girls, we're dedicated to guiding you through this evolving landscape with expertise and care. Our commitment is to ensure a seamless, enjoyable real estate experience, where your needs are prioritized, and your goals are met. Whether you're buying, selling, or renting, we're here to provide the support and insight you need to make informed decisions and achieve the best outcomes.
