Real Estate Commissions are Changing: What You Need to Know About the Buyer’s Broker Agreement (BBA)
The real estate industry is facing significant changes, especially regarding how commissions are disclosed and displayed online. This shift will impact both Realtors and buyers, making it more critical than ever for Realtors to demonstrate their value and for buyers to understand the importance of having a dedicated buyer’s agent. This blog will delve into these changes, emphasizing the importance of Realtors and how the new Buyer’s Broker Agreement (BBA) will reshape the landscape.
Understanding the Change
Traditionally, the seller and the listing agent agree on a total commission when selling a property. This commission is then split between the listing agent and the buyer’s agent. The buyer’s agent's commission is typically shown in the MLS under “realtor information,” indicating what the seller is willing to pay the buyer’s agent. However, this information will no longer be displayed in the MLS or IDX feeds moving forward. Realtors can still display this information on their websites but cannot feed through an IDX.
This change means buyers and their agents must proactively discuss and negotiate commissions at the start of their relationship. The new process will require a greater emphasis on transparency and upfront agreements, mainly through the implementation of the Buyer’s Broker Agreement (BBA). According to Becky Sigler, founder of The Sigler Group in Tampa, Florida:
“Real estate commissions are going to change dramatically. MLS and IDX platforms will no longer display any information regarding commissions. Realtors must now communicate their compensation directly to clients rather than relying on platform disclosures.”
Under the new regulations, buyers must sign a Buyer’s Broker Agreement before Realtors can show them homes. This agreement outlines the terms of compensation for the buyer’s agent, ensuring clarity from the outset of the client-agent relationship.
Beth Anton, a veteran Realtor with over 40 years of experience at RE/MAX Distinctive in Northern Virginia, shared her insights:
“ The industry is facing a pivotal moment with these changes. Forms are evolving rapidly, and there’s uncertainty about how these adjustments will impact transactions. Transparency is key, but it’s also causing apprehension among both agents and buyers.”
What is The Buyer’s Broker Agreement (BBA)?
The BBA is a contract between the buyer and the buyer’s agent, outlining the compensation the agent will receive. This agreement must be signed before the agent takes the buyer on tours of homes. It details the addresses of the properties to be visited and the expected compensation. Essentially, it formalizes the relationship between the buyer and the agent, ensuring that the agent’s services are appropriately compensated.
This new requirement aims to eliminate ambiguity and ensure that both parties are clear about the terms of their relationship. It also addresses potential conflicts of interest, such as “steering” buyers towards specific properties based on the offered commission. For instance, if a seller only provides a 1% commission and the agent expects 2.5%, the BBA will specify that the buyer will cover the 1.5% difference.
Six Reasons Why Realtors Are Worth Every Penny
With these changes, Realtors must clearly demonstrate their worth and the value they bring to the table. Here are some key reasons why Realtors are invaluable in the home-buying process:
Expert Negotiators: Realtors are skilled negotiators who can help secure the best deal for their clients, whether buying or selling.
Market Knowledge: Realtors have in-depth knowledge of the local market, helping buyers find the right home at the right price and sellers set competitive prices.
Access to Listings: Realtors have access to the most current listings and can arrange viewings quickly, providing buyers with more options.
Paperwork and Legalities: The home-buying process involves a lot of paperwork and legal considerations. Realtors ensure that all documents are correctly completed and filed, reducing the risk of legal issues down the line.
Professional Networks: Realtors have extensive networks of professionals, including inspectors, appraisers, and contractors, who can assist throughout the buying process.
Emotional Support: Buying or selling a home can be an emotional journey. Realtors provide support and guidance, helping clients make informed decisions.
Addressing Fears and Concerns
Both Realtors and buyers have understandable concerns about these changes. Here’s how to address them:
Realtor Concerns:
Awkwardness: Discussing compensation upfront can feel uncomfortable. However, transparency is key to building trust and ensuring fair compensation.
Education: Realtors must educate themselves about the new requirements and how to communicate them to clients effectively.
Ensuring Payment: The BBA formalizes the compensation agreement, ensuring that Realtors will be paid for their services.
Circumvention: With a signed BBA, buyers are less likely to bypass their agent and go directly to the listing agent.
For Realtors like Sigler, the shift is expected to streamline operations but may also lead to increased client education efforts. She stated:
“Buyers may now seek out listing agents directly to avoid signing a BBA and attempt to save money,” notes Sigler. “It’s crucial for Realtors to demonstrate their value and expertise.”
Buyer Concerns:
Signing Agreements: Buyers may hesitate to sign the BBA, fearing it may not be a good fit. Realtors should emphasize the benefits and provide clear explanations of the terms.
Exclusivity: The BBA may seem restrictive, but it ensures dedicated service and clarity on compensation.
Expense: While there may be concerns about increased closing costs, Realtors can help negotiate terms that align with the buyer’s budget.
Anton emphasized the practical challenges for buyers:
“Buyers need to be prepared to discuss agent compensation upfront. This could influence their offer strategy and overall transaction costs.”
Sigler added:
“Realtors must now educate clients about these changes and the importance of working with a knowledgeable agent. It’s about ensuring that clients understand the value they receive in exchange for our services.”
Seller Concerns:
Market Impact: Sellers generally understand the need to sell their home and may not have significant concerns about these changes. However, they should know how compensation structures might influence buyer interest.
Paniz Asgari of the Asgari Group of Compass in downtown DC highlighted the resilience of high-caliber agents in adapting to these changes:
“High-caliber agent advisors will rise to the top because educated buyers and sellers will seek them out. In the DC area, buyer agency agreements are an existing standard of practice, so this isn’t something new for us. While the changes may require more legwork upfront, especially with commissions no longer being listed in the MLS, the fundamentals of real estate remain unchanged. Real estate was bought and sold before the internet existed.
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The Future of Real Estate
The introduction of the BBA and the changes in commission disclosure represent a shift towards greater transparency and professionalism in real estate. This change will likely reduce the number of “COVID agents” who entered the market during the pandemic without adequate experience. Only true professionals who understand the value they bring to the table will thrive in this new environment.
Realtors must embrace these changes, educate their clients, and showcase the immense value they provide. By doing so, they can ensure they are fairly compensated for their expertise and continue to serve their clients effectively in a rapidly evolving market.
Best Realtors in Tampa, Florida
In conclusion, while these changes bring challenges, they also present opportunities for Realtors to reaffirm their value in the market. At The Sigler Group, we remain committed to delivering exceptional service and expertise throughout the greater Tampa Bay area. Contact us today for more information on navigating these changes or to discuss your real estate needs.
