By Gene Galin
Pittsboro, NC – With sweeping changes to real estate sales rules coming into effect, the industry is facing a wave of uncertainty and adjustment. I sat down for a conversation with Eric Andrews, a Chatham County real estate expert. He delves into the impact of these new regulations, which went into effect following the settlement with the NAR, and offers key insights for both sellers and buyers. From the increasing importance of negotiating commissions to the potential pitfalls of bypassing buyer’s agents, Eric offers a guide for navigating this evolving landscape. This is part 2 of our two-part conversation.
The impact of new real estate regulations
The real estate industry is facing change as new regulations governing sales commissions and brokerage agreements come into force. Designed to make real estate transactions more transparent and competitive, these changes are expected to have a far-reaching impact on the buying and selling of properties across the country.
Eric Andrews stresses the importance of understanding these changes, especially for those who may be tempted to bypass traditional buyer-agent relationships to save on commissions. “This is a whole new game,” Eric says, “and everyone – from experienced agents to first-time buyers – needs to be aware of how these new rules will affect their transactions.”
The changing landscape: buyer and seller dynamics
Under the new rules, the role of the buyer’s agent has become more flexible, and commissions are fully negotiable. This is a significant departure from the traditional model where buyer’s agent commissions were often dictated by the agent. Now sellers have the option to set a buyer’s agent commission of up to zero, which could fundamentally change the dynamics of real estate transactions.
Eric notes, “We may see some sellers opt to reduce the buyer’s commission to zero, particularly in high-demand markets where properties are likely to sell quickly regardless of the use of an agent. However, this could place more responsibility on the buyer, who may not be able to navigate the complexities of a real estate transaction without professional advice.”
The risks of solo business
One of the scenarios discussed by Eric is the increasing ability of buyers to negotiate directly with the seller’s agent without using a buyer’s agent. While this may seem like a cost-saving measure, it carries significant risks. Without a buyer’s agent, the buyer is responsible for all aspects of the transaction, from negotiating the sales price to understanding the intricacies of contracts and disclosures.
“This is where it can get really tricky,” warns Eric. “Real estate transactions are complex, and without a buyer’s agent, buyers are essentially left to navigate these waters on their own. They may save on commissions, but in the long run they could end up paying a lot more if they overlook important details or fail to negotiate effectively.”
He compares this scenario to “cutting your own hair – it might work out well, but if it goes wrong, it goes really wrong.” This analogy underscores the potential dangers of attempting to complete such a significant transaction without the help of an expert.
The importance of local expertise
Eric also stresses the importance of working with local real estate professionals, especially in unique markets like Chatham County, where he operates. “Real estate is hyperlocal,” he explains. “Agents from outside the area may not understand the specific challenges and nuances of the local market – things like well water systems, septic systems and zoning restrictions.”
In areas like Chatham County, local expertise is critical. “I’ve been on closings where the other agent didn’t even know what a well was,” Eric says. “That’s a problem. When you’re buying or selling property in a place like Chatham County, you need someone who knows the area inside and out.”
The value of local knowledge goes beyond simply understanding the physical aspects of a property. It also includes familiarity with local regulations, market trends and even relationships with local authorities, which can be invaluable during the buying or selling process.
The role of lawyers in real estate transactions
While real estate agents play a critical role in guiding buyers and sellers through transactions, Eric stresses the importance of involving attorneys, especially in states like North Carolina where an attorney is required to complete a real estate deal.
“Attorneys make sure the title is clear, all the paperwork is in order and the transaction is legal,” explains Eric. “They are not involved in the nuances of the market like real estate agents are, but they play an important role in the closing process and make sure everything is above board.”
He points out that while lawyers are essential to closing, they should not replace the expertise of an experienced real estate agent throughout the transaction. “Lawyers and agents have different roles, and both are necessary for a successful real estate transaction.”
Market adjustment: Sellers and buyers adapt to the new norm
Eric expects the new rules to impact sellers and buyers differently. For sellers, particularly those with properties in high demand, the new rules may not significantly change how they operate. But for others, particularly those in less competitive markets, the ability to negotiate commissions may require a more strategic approach to attracting buyers.
“I think we’re going to see a whole range of different situations,” Andrews speculates. “Some sellers may choose not to offer commission to buyer agents, especially in hot markets, while others will continue to see the value in offering incentives to buyer agents to refer qualified buyers to them.”
On the buyer’s side, Eric expects a learning curve as consumers get used to the idea that they may have to negotiate their agent’s commission or even consider completing the transaction without an agent. “The key here is education,” he says. “Buyers need to understand what they’re getting into if they decide to go it alone. The potential savings could come with significant risk.”
Preparing for the unknown: The future of the market
The property market is notoriously difficult to predict and the introduction of these new rules adds another layer of uncertainty. Eric is cautious but optimistic, acknowledging that while there will likely be challenges, the market will ultimately adapt.
“Real estate has always been about adapting to change,” says Andrews. “Whether it’s new regulations, market changes or economic factors, those who can adapt are the ones who succeed.”
He also acknowledges the potential for “horror stories,” particularly among buyers who may attempt to complete transactions without professional help. “We’re going to see some people make mistakes – potentially costly ones – because they think they can do it on their own. That’s going to be a hard lesson for some.”
Advice for buyers and sellers in Chatham County
For people in Chatham County, where Eric has deep roots, his advice is clear: work with local professionals who understand the region’s unique challenges and opportunities. “Whether you’re buying or selling, having someone who knows the local market is invaluable. It can make the difference between a smooth transaction and a disaster.”
He also recommends that buyers and sellers take the time to understand the new forms and contracts that have been updated in response to the regulatory changes. “These forms have been revised to comply with the new rules, and not everyone is familiar with them yet. Make sure your agent is up to date and can explain the changes to you.”
The future of real estate: lessons from the past
As the real estate industry grapples with these new regulations, Eric can draw on his years of experience to offer perspective. “This is not the first time we’ve seen major changes in real estate, and it won’t be the last. The market will adapt, and so will the professionals who work there.”
He reflects on past changes, such as the increasing complexity of real estate contracts and the rise of digital tools in the industry, and notes that each new challenge has ultimately led to a more demanding and resilient market. “It’s all part of the evolution of the real estate industry,” he says. “The key is to stay informed, stay flexible and always put the client’s best interests first.”
Navigating the new real estate landscape
The introduction of new rules for property sales represents a significant change in the way transactions will be conducted in the future. It is important for buyers and sellers alike to understand and adapt to these changes.
As the market adjusts, Eric Andrews’ advice remains clear: leverage local expertise, partner with professionals who understand the complexities of the transaction, and be prepared for a learning curve as the industry adjusts to the new normal. Ultimately, the real estate market will evolve like any other – and those who are well prepared will succeed.
