[Editor’s note: this story has been updated. For the latest developments on the topic, read my November 15, 2024 story here.]
Keeping The Intent in Mind
Whenever I’m speaking with anyone about the change coming in residential real estate, I start at the same place: understanding the intent of the settlements is key. Broadly speaking, the aim is to bring greater transparency and clarity to transactions. That’s a good thing.
Some of these changes, though, will seem strange and unfamiliar to buyers, who will be required to adopt new practices in their searches. One of those is that after the changes take effect nationally on August 17, homebuyers must sign a written agreement with a broker.
This is new. But the motive, again, is to encourage transparency.
The Buyer-Broker Agreement Comes to The Party
In many states, signing a written buyer/broker agreement has been a requirement for years. But New Mexico has not been one of those states. Their use here has been limited. What’s their purpose?
These agreements typically accomplish a few things: 1) they identify the parties who are working together 2) they specify a term during which they propose to do so 3) they specify whether the agreement is exclusive (with that broker only) or non-exclusive (a buyer may work with multiple brokers). In certain states, where brokers more frequently act in an agency capacity, these agreements 4) specify agency or a lesser form of representation known in New Mexico as transaction brokerage. Given how complex real estate transactions can be, it’s a prudent thing to have the terms of a relationship in writing.
Right? Absolutely.
What’s Different?
One thing that’s different is that as of a certain date, having a signed buyer-broker agreement will be required before a single property is shown. That’s right! In the past, one could sign one at the outset, after a week or two, before an offer’s submitted, or never. Now it has to happen at the outset. This question is somewhat in flux but as of right now, that’s the state of things.
The agreements themselves are not that big of a deal. Again, they identify who’s working together, for how long they plan to do so, whether the arrangement is exclusive, and (often) whether agency will be in force. Not huge.
Acceleration of Certain Buyer Conversations and Decisions
But some of the conversations and decisions about the house-hunting process will be accelerated. For some, having to decide about working with a particular broker will arrive uncomfortably early. Why, you might ask, would the National Association of Realtors (NAR) submit to a provision that seems to make the process more cumbersome? Answer: these agreements are one of the mechanisms through which more transparency and flexibility is introduced into transactions. How? Via the mandate that sellers have choice as to whether to offer compensation to buyer’s brokers. That is the crux of the matter. And there will now be a number of scenarios under which a buyer’s broker can be compensated, not just one.
A Page from The New Mexico Association of Realtors’ Buyer-Broker Agreement
One positive effect is that it will become more important for buyers to have a broker (me!) who’s done his or her homework, who knows the contours of the new landscape as well as the old, who welcomes competition, and who can negotiate the coming terrain. My advice is to embrace the (seeming) greater complexity; good things will inevitably come as the system evolves and buyers and sellers will be much better informed from the outset.
To read more, see the National Association of Realtors’ “Written Buyer Agreements 101,” available here.
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