Author: Dianne Gregoire

If you are paying attention to the headlines, you know that a big change happened in the Real Estate industry that went into effect last Saturday. It was the culmination of a lawsuit brought by the Department of Justice against the National Association of Realtors and several of the largest National Real Estate Brokerages.

The gist of the lawsuit was that the traditional method of agents who represent buyers to be paid resulted from the listing contract between the listing agent and the seller of a home. The Department of Justice determined that this was price fixing because it excluded the buyer from having any influence on the commission that their agent was paid. The courts agreed and in May a fine of 418 million dollars was imposed upon the defendants.

How does this affect you? It’s going to have a big impact when you buy or sell a home.

When you sell a home, your Realtor can not provide any information in the Multiple Listing Service that indicates whether or not you are willing to pay the buyer’s agent commission. I suppose that means that you could benefit because you only need to agree to pay your Realtor that you have hired to sell your property. Sounds pretty good, right? However you need to consider the situation that most buyers are in. They’re the folks who have to have enough money to pay their down payment and their closing costs. That is a big sum of money. Most buyers are pushing themselves financially to come up with these funds. As a seller, you are likely enjoying years of equity that has built up in your home. At the time of selling, you will be flush with cash, in most cases. Paying the buyer’s agent commission is likely more affordable for the seller than it is for the buyer.

As a buyer, you will have to enter into a contract with your buyer’s agent in which you agree to pay your Realtor. Being a Realtor is not a charity situation. Realtors need to know that they will be paid. If a seller declines to pay the buyer’s agent, the buyer will need to do so. So be prepared to financially plan to pay a buyer’s agent commission. That commission is negotiable and is between you and your Realtor.

From my perspective, I think that this new law will be very hard on buyers: particularly first time home buyers. That entry level market is already the most competitive and the most likely to involve multiple offers. The typical first time buyer is putting down a very small down payment. That already bodes badly for them when they are competing against investors who have large down payments or all cash. Now imagine that the seller has several offers and they are determining which brings them the most benefit. Are they going to go with the offer with a small down payment who also asks them to pay the buyer side commission? Nope. Not when there is an offer that not only has more cash on the table but also doesn’t ask them to pay an extra commission.

Last, I want to mention that it is now against the law for a Realtor who is not representing the seller to show a houses to a buyer without a Buyer Broker Compensation Agreement. So if you are casually calling around and asking Realtors to show you houses, you are going to have to have a signed contract to get into any house that the Realtor is not the listing agent for.

There really is nothing so certain as change. We will all get used to working with these new rules. I do like that it puts the buyer side commission right up front and creates an honest conversation. I also think it is not good for entry level buyers, but we will figure this out. We can do it.

Dianne

In the early years of my career, shake roofs were considered to be the premium roof that a person could put onto a house. Because of their thickness, they create more shadows that make the roof more interesting. Entire neighborhoods were constructed where shake roofs were a requirement of owning a house. The thought being that it made the entire neighborhood look better.

Then, a few years into my career, there was a horrific fire in Orinda, California. Entire neighborhoods were wiped out. It was very publicly acknowledged that the fire grew so big, and spread so fast, because of the shake roofs on most of the houses.

There was a very real change in how people looked at owning a house with a shake roof. Now, there is a new twist.

Two weeks ago, representing a buyer, I was involved in the sale of a home in Westlake that had a shake roof. My client and I discussed this roof at length, the additional fire hazard, but also the need for professional maintenance. My client loved the house and made an offer that was accepted.

That’s when the problem was discovered. We could not find an insurance company willing to write a home owner’s policy for the house because of the shake roof. It’s important that I point out that the roof was 20 years old. It had been beautifully maintained, including just recently, but insurance agents that we talked to said the cut off for insuring a shake roof is 20 years. If it were newer, they would insure it.

There have been so many horrific fires in the last 10 years or so. I can totally understand that insurance guidelines have been tightened as a result. I can not say that there is not an insurance company that would insure a 20 year old shake roof, we just had no luck finding one.

So it’s something to have on your radar when you are buying a house. It’s also something to have on your radar if you are planning to sell a house with a shake roof.

I hope that you have found this information useful,

Dianne