The new commission rules as per the NAR Settlement in mid August are now in full force. It’s impressive to see how most agents are nimbly navigating and evolving to meet the new requirements and do business as usual. Now more than ever it’s important to develop a mindset that embraces – and makes the most of – the still-new commission rules. One effective way to do this is to double-down on your next Open House. The Open House marketplace can create opportunities to bring in more qualified buyers. Although the new commission rules add the burden of ever-increasing paperwork, it’s possible to turn those lemons into lemonade. Here’s how to make the most of the new rules on your next Open House:
THE GRAY AREA OF OPEN HOUSE ACTIVITIES
At the moment, there is a lack of clearly defined guidance when it comes to Open House activities. NAR states: “You [the buyer] do not need a written agreement if you are just speaking to an agent at an open house or asking them about their services.” As such, it’s hard to know exactly at which point an agent might enter into buyer representation when hosting an Open House. NAR also says: “Written agreements are required for both in-person and live virtual home tours.” It’s a little confusing, to say the least. As a result, brokerages in many states (like California) have gone above and beyond and created their own agent mandates out of an abundance of caution.
MAKING THE MOST OF THE NEW PAPERWORK
When holding an Open House you (or your team member) are representing the Seller and have a listing agreement in place to verify that fact. Prior to the new rules going into effect, there was often (depending on your brokerage and state) no requirement to have visitors sign representation agreements. They would file through the door, sign a guest list, and then be free to ask questions and expect answers from you as they were touring the home.
But now things are different. It’s true that the NAR Settlement rules don’t enforce new requirements specific to Open House activities. But it has started conversations around additional Open House disclosures being implemented. To be safe, many brokerages have already jumped in to start the process and guide their agents. A step-by-step approach could look like the following:
- As we already know, the new commission rules now require Buyers to sign a written agreement with their agent before an in-person or virtual tour of a property. But many visitors show up to an Open House without an agent or don’t already have one.
- If you aren’t representing the visitor that shows up at your Open House, have them sign a form that makes it clear you are not representing them (and depending on your state and brokerage you might already be doing this).
- If the visitor chooses to have you represent him/her during the open house you can then have them sign a form for limited property representation which outlines a compensation agreement.
ADDING TO YOUR BUYER POOL
Number 3 is where you conceivably have some advantages. No one can predict with certainty the long-term effects of the new commission rules on the real estate market as a whole. But it’s logical to assume that a number of buyers will choose to forego buyer agents altogether and deal with listing agents directly. This is not necessarily a good idea, per se, and in some states it’s not even legal.
However, getting an offer in and accepted is still a competitive experience due to the housing shortage. Many buyers just want to be able to move quickly and get their offer accepted. Depending on your market, it’s not uncommon for visitors of an Open House to decide then and there to make an offer. But what if they don’t have an agent? One short cut invariably will be more widespread use of dual agency in places where it’s legal and in brokerages where it’s not prohibited. (As it now stands, dual agency is illegal in the following eight states: Wyoming, Alaska, Vermont, Colorado, Florida, Maryland, Texas, and Kansas. All the other states and the District of Columbia permit dual agency.)
USE YOUR OPEN HOUSE TO DEVELOP NEW RELATIONSHIPS
Real estate is all about relationships. The requirement for additional forms creates transparency and outlines expectations in a clearly defined way. Having a buyer representation agreement executed as a result of the Open House process can create new representation opportunities for you. This is particularly true for teams who have the additional manpower to leverage the extra work the forms require. And let’s face it: many of your Open House visitors will realize the house doesn’t fit their needs and move on. But, during the process of signing forms, giving a tour and answering questions you now have the golden opportunity to get to know your visitors. This is an opportunity to impress them with your professional skills and expertise. If you do a good job of it, it’s likely that a number of those visitors will come back to you for help with finding the perfect home. And they will also be more likely to commit to the required buyer representation forms. Because now they know you in a much more involved way than ever before.
PROVING YOUR SKILL & EXPERTISE
Some things will never change. Proving your skill and expertise to your clients top the list as your most important selling point. Convincing your would-be clients that you have knowledge and experience in determining fair market value and negotiating all aspects of the transaction is key. This includes price, in-depth understanding of current market conditions in the area, trends and comparables. You also have access to the Multiple Listing Service and are connected to a larger network of fellow industry professionals. Determining fair market value and negotiating the best deal requires experience and skill. This is why buyers need good agents.
EVERYTHING IS NEGOTIABLE
More than ever, everything is negotiable. One could argue that the new commission rules add one more tool into the negotiating pile. This can be accomplished in a number of ways:
- The seller can still choose to pay the buyer’s agent (but the offer of compensation cannot be mentioned on the MLS).
- The buyer can pay part or all of their agent’s commission (which must be outlined in the buyer representation agreement).
- Buyers can include payment of their agent’s compensation as part of their offer.
- Buyers can ask for a credit at closing to help pay their agent’s fee.
And so forth. Negotiations can get very creative and each offer situation has its own nuances which will set the stage for negotiations. Learning to read those nuances and effectively leverage them is an entirely different thing. In the end, it’s what makes the difference between a gifted, top-level agent and one that isn’t. But make no mistake: top-level agents will use the new form requirements as a way to leverage new opportunities. For agents that choose this mindset, lemons will become lemonade.