Buying a Home? Changes you NEED to know!

by Paul Tylock

Buying a home today and who you choose to represent you through the buying process is more important than it ever has been. Recently, new laws and regulations have changed the way people buy real estate nationwide, and for the foreseeable future, it's something we'll all have to get used to. Most transactions will end up the same way they always have, but as a buyer, you need to understand the new process so you are fully prepared.
 
 
How Things Used To Work
 

For decades, real estate transactions typically followed a common framework: the seller's agent charged a fee, usually around 5% to 6% of the sales price. This fee would then be split equally with the buyer's agent. When a buyer officially purchased a home, the buyer’s agent’s commission was deducted from the seller’s proceeds. This arrangement relieved the buyer from having to pay out-of-pocket for their agent’s services at closing. This is still the likely scenario that will be pursued. Which I will explain why below.

     
The New Way
 
Now, here’s where things get a little uncomfortable. Buyers will now have to sign an "exclusive agency agreement" with their agent of choice to represent them BEFORE EVEN ENTERING A HOME!!! That's right, the powers that be, feel it's in your best interest to sign an agreement with a Realtor you may not have ever met in person and BEFORE you even step foot into any house.

Don't shoot the messenger! This is not just a rule Realtors have to follow; this is Louisiana State law going into effect in August 2024. This will be nationwide!

In that agreement, there’s a compensation field, and you could be responsible for paying your Realtor for their services.

As a buyer, before you only needed to worry about your down payment for the loan you qualify for, home inspection costs, and potentially your closing costs. Now, your agent's fee could be an added expense.

However, the agreement also states that the buyer's agent fee is to come from the SELLER (the original way), which is likely the route most will pursue, as previously mentioned. The issue is that there’s no guarantee this will happen, and each house could be different.

The old way, the seller's agent already had a signed agreement with the seller offering the buyer's agent compensation before the home went to market. And that compensation was displayed for all to see. Now, it will be on a case-by-case basis. It’s completely up to the seller to offer that compensation. Technically, it always was up to the seller, but the new laws prohibit the seller’s agent from negotiating the buyer's agent fee up front.

Many sellers are still willing to pay for a buyer's agent, as this can lead to a smoother transaction. Having a competent agent on both sides ensures a fair and efficient process for both buyer's and seller's. It's similar to a jewelry store owner compensating their staff: the added support can significantly enhance the overall experience. Could you imagine a random person not accompanied by a licensed Realtor entering someone's home alone? Then having to negotiate with their best interest in mind through such a complex transaction? Seller's will understand the risk there.

Furthermore, it’s essential to remember that the transaction hinges on the buyer's funds; ultimately, the buyer holds significant leverage in the process. Most sellers understand that buyers have numerous financial commitments that must be considered for the sale to proceed successfully.

This situation emphasizes the importance of choosing the right buyer's agent. Make sure to vet your potential agent thoroughly. Here are some critical questions to consider during your selection process:

  1. How many years have you been in business?
  2. How many transactions have you closed?
  3. What sets you apart from other Realtors?
 
Why Me or a Realtor Like Me?
 
How many years in business - since 2015
 
How many transactions closed since then - 413 with $100 million in sold sales volume.
 
What sets me apart from other Realtors - Other than the 400+ transactions I've closed for my past clients. I am also actively buying and selling my own properties. I have personally bought, remodeled, and sold over 50 properties in the Lafayette area. I have purchased vacant land and designed floor plans of my choice and hired a builder to build these homes for me to resell to individuals like yourself.
 
By constantly putting myself in the same position as my clients has allowed me to intimately understand the situation they're in, the pitfalls to look for when buying/selling, and the ability to see a problem that most won't see until they've officially purchased the home. When it's too late!!!
 
I have a saying I use for my buyer's. Which is " Whatever home they decide to purchase, would I want them calling me back in a year to try and sell it "? In other words, am I helping you buy someone else's problem? I will be looking for defects in the property to ensure you are NOT! I've passed my experience over to my clients when representing them. This is similar to hiring a financial advisor that's deeply in debt. Wouldn't you rather someone that's practicing what they preach?
 
My wife has been a mortgage lender for over a decade. Which has allowed me to become well versed on the different types of loans offered to buyers when purchasing a home and the requirements needed. Why is this important? Just because you are pre-approved to purchase a home, that doesn't necessarily mean every house you see is available to you. Your Realtor needs to know this and they need to know why! Has the roof on the home you like exceeded its life expectancy? Is the insurance company that's providing your homeowners insurance going to make you replace the electrical panel? These are the types of things I've learned to point out when trying to help my clients find the perfect home. 
 

Real Life Example

My buyer client agreed to a 3% commission. After viewing a few homes, we found the one they liked. We made an offer of $220,000 ($5,000 less than asking) with the SELLER to cover my 3% commission ($6,600). The seller agreed to the price but was willing to offer $5000 towards my compensation to represent the buyer. After discussing this with my buyer client. They agreed to make up the remainder of my commission, which was $1,600. So as you can see, my buyer agreed to 3% at first, but only ended up having to come up with 1/4 of that amount after the seller contributed the majority. There's also plenty of examples of the seller covering 100% of the buyer's agent fee.

 

So even though you have to sign this document up front, it is all negotiable throughout the entire process. When your agent ask you to sign a buyer's agency agreement, remember there's going to be a whole another party involved (the seller) in this transaction that is more than likely willing to contribute to cover some, if not all of the buyer's agent fee! 

 
Conclusion and Source
I hope you have found this article helpful and I have provided links below if you would like to dive a little deeper into the new way of buying and selling real estate.
 
Buyer's guide with new changes
 
Fast forward to the 1:58 second mark. This is the part that will explain how the buyer must sign an agreement before entering the property.
 
First section will show HB 366/ACT 690 signed into law. 

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