Lubbock: How Will Recent Changes Affect Buying And Selling Homes?

If you find the thought of buying or selling a home in Lubbock a little intimidating, you are not alone, especially with new laws that affect real estate transactions throughout the U.S.

I'd love to buy a home, and I'm nearly ready, but I'll admit that these new rules scared me a bit, so I reached out to a realtor friend, Sarah Kanagaratnam, to help explain.

Sarah, why are there new rules for buyers and sellers?

The recent changes in real estate representation stem from the lawsuit that was settled earlier this year.

The lawsuit with NAR [National Association of Realtors] that was settled at the beginning of the year was the catalyst for all of the changes in forms/contracts that we are seeing this month.

The verdict stated that the defendants “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law.”

[You can take a deep dive into that lawsuit here]

How did commissions work before the lawsuit? 

Traditionally, when an agent listed a property, they would split the commission with the buyer’s agent. Most of the time, the split was 50/50, but there were sometimes variations.

Then, when the agent would list the property in the MLS (Multiple Listing Service), they would share in that listing what percentage of commission the buyer’s agent would receive.

This means that the buyers were not paying cash up front to their agents, but rather, the buyer’s agent was receiving payment from the listing agent, and the listing agent most commonly received their payment from the proceeds of the sale.

How will commissions work now? 

The thing to remember is that commissions are, and always have been negotiable. Sellers are still able to offer commissions to buyers, but they are not obligated to do so, and they are no longer able to share this information through MLS (though the agents may still call or text the listing agent to find out if they are offering buyer’s agent commission).

This means that the buyer could potentially need to come up with more money in order to pay their agent themselves.

What is the purpose of the "buyers representation agreement" we have to sign now? 

A large portion of the time, the buyer did not have to pay cash/check to their agent at closing. Now, with the new forms, it is more explicitly stated up front that they may receive compensation from the seller, landlord, or their agent, and if they do, it will be credited to the buyer.

The wording allows for more clarification that there is room for negotiation between the parties on this matter.

Additionally, buyer’s agents are no longer allowed to even show a property to a potential buyer without a buyer representation agreement signed by the buyers, as well as an agent.

If the buyer does not have an agent representing them, then the listing agent would be able to use this form to show the buyer the property for a set fee. This does not mean that the listing agent represents the buyer in the transaction, and they would still have the opportunity to seek their own separate representation if that’s what they wanted to do.

Can you give us a "too long, don't read" version? 

TLDR: the changes are designed to protect the buyer and seller by providing more transparency regarding the monies that agents receive during the transaction.

Remember, real estate agents are trained professionals who can help you navigate what can be a confusing, complex, and intimidating process. If you have questions, reach out to Sarah, or any of the other amazing local Lubbock realtors.