In July of this year, the way agent commissions work in the real estate industry will change. Currently, commission rates of nearly 6% or more are the standard. If you’re a first-time home buyer, you might not know as much about the process as someone who has bought and sold multiple homes. For context, currently, both the listing agent and the buyer agent equally split the commission price of a home which comes out of the seller’s pocket. Often, the seller will negotiate what the exact commission percentage will be before they accept an offer. Thanks to a long legal battle with several corporate real estate companies, the Federal Government has passed a law that alters this long-held dynamic
The new law requires that buyers negotiate the buyer agent fee with their agent directly. Where before the commission would be an equal split between the listing and buyer agent from the accepted offer on behalf of the seller, now the buyer must negotiate their agent’s fee prior to purchasing a home. Previously such fees were not something that could be mortgaged. With the changes in this new practice, likely a heavier cost will be put on the buyer, adding fees and complications.
While this may seem daunting, you are not without options. Because the way buyer agents get paid has changed, leveraging an adjustable-rate mortgage or a Home Equity Loan may be the perfect fit for your financial needs. Additionally, because the rate for agent compensation is even more closely tied to the market, the long-held 6% rate is expected to fluctuate. Not only that, but some agents may request a flat fee upfront regardless of percentage. An adjustable-rate mortgage is a perfect example of how you can make your finances work for you in this changing marketplace. If your buyer agent requests a fee upfront, you can then take this into account when you begin shopping for mortgages.
Regardless of what you choose, purchasing a home is a complicated process and that’s why we recommend coming in to speak with us directly. We exist to serve our communities well and are happy to go over these processes with you in person. Your financial success is our priority and it’s important to understand not only that you have options, but the minutiae of what those options are. Especially if you are a first-time home buyer, understanding your finances and talking it over with experts is best practice.