Kailua Kona Real Estate Blog

Buyer Representation Agreement Don’t Sign without Asking These 5 Questions

The rules have changed for home buyers and you don’t want to sign any agreements without asking these 5 questions first. 

Aloha friends, it has been about 90 days since the National Association of Realtors settlement agreement with the Department of Justice went into effect and the process for home buyers to purchase a property has been a little confusing and yes overwhelming.  So today we are going to give you an update on this new change to the home buying process and at the end clarify whether you need to sign any agreements first before viewing an Open House. 

If you are not aware of these new rules let’s give you a brief update.   As of August 17^th 2024, if you want a Realtor to represent you in the purchase of a property you are going to be required to sign a Buyer Representation Agreement before you can view any properties with them or even have them do a virtual showing of that property. 

This agreement has a financial commitment on your part that if the seller does not pay your Realtor a commission, you will be obligated to make up the difference or pay that commission in full 

So, if you are a buyer looking to purchase real estate and want a Realtor to represent you, our recommendation is make sure you pick the right Realtor and do your due diligence before signing any agreements. 

This is a contract and all Realtors are required to have you sign one.   they are legally binding and as mentioned previously they have a financial obligation attached to it that you are responsible for. 

So how do I go about finding out who is right for me.  Well, you can check them out on Google or places like Zillow.   Ask for references or testimonials from past clients.   There are many places you can go online and find out information on the Realtor’s you are interviewing 

Have a consultation with them before you make a commitment to see if your personalities clash or are you both on the same page.

Do they have any real estate designations such as an Accredited Buyers Representative or Certified Residential Specialist?  You want to make sure they have the expertise that you need to meet your real estate goals. 

Don’t just sign a piece of paper because someone says you have to.   this is a contractual agreement and you want to be sure you are making the right decision. 

It is important to understand that this agreement does have a financial component to it and it will be negotiated at the time you sign, it does not automatically mean that those dollars are coming out of your pocket at closing.  We are seeing more than about 95% of the time, sellers are still offering or paying the buyers broker commission at closing 

So, selecting the right Realtor to represent you is critical because they will need the skill to negotiate compensation since it is now a part of the purchase contract 

If you need a mortgage to buy a home, it is really, really important more so than ever to have a mortgage lender that works closing with your agent because not only is commission a part of the purchase contracts now, but also contributions from the seller at closing.   Yes, purchase contracts have become more critical than ever and making sure your agent and lender work hand in hand will ultimately affect you when you find the right property 

Another question you can ask your agent before signing an agreement is what does their lender partnership look like.   Do they even have a trusted lender they use and recommend.   The mortgage side of the real estate transactions have been impacted by these new rule changes so you just can’t use anyone these days 

So here are the 5 questions you should ask your Realtor before signing the Buyer Representation agreement

#1 What properties does this agreement cover?

Are they all in a specific community, city, area.  Make sure this item is addressed

#2 How long will this agreement last?

A day, a week, a month, 3 months, 6 months?  Don’t sign an agreement for a lengthy period of time unless you are sure you want to work with that Realtor don’t forget this is a contract and you don’t want to be stuck with someone you don’t trust and like

#3 If things aren’t working out Can I cancel this agreement?

This agreement does have a start and end date and you want to make sure you can cancel if you are not getting along or your agent is not meeting your expectations.    It is normal for a 5 to 7 day notification to cancel this agreement anything longer than that you may not want to agree with 

#4 How Much Do I owe You?

As mentioned, there is a financial obligation to this new buyer representation agreement and we are finding sellers still willing to pay the buyers agent a commission. However, if the seller is not willing to pay the amount of commission that was agreed upon in your buyer rep agreement you will be required to pay the difference at closing.  So you need to know specifically what you owe your agent at closing if the sellers are unwilling to pay them  Remember this is a negotiated item with your agent

#5 Are they any other terms to this agreement.

Great question to ask and see if they have an answer, it could be a simple No and that is great, but make sure you ask are there any other terms or conditions with this agreement 

Well this is a lot for you to take in especially if you have never purchased a home before or you have purchased many and now the rules and procedures have all changed 

If you liked this information and want to learn more about the home buying and selling process here on the Big Island contact us at Therese@realestatekailuakona.com  You can call or text us at 808-300-9393

 So Do I need to sign and buyer representation agreement to view an Open house?  The answer is no according the NAR settlement it is not required.   If an agent tries to make you sign an agreement you are not obligated to do so.

If you need any real estate assistance, feel to free to reach out to us anytime, we would be honored to help you.  Mahalo nui Loa