Real estate contracts can be confusing. There are terms and conditions unfamiliar to home buyers. Signing contracts without understanding the terms could seriously cost buyers.
New changes to the real estate market mean contracts would need to mention commissions in the contract. It should also outline who pays the agent's commissions and how much. These make it more important for buyers to scrutinize the fine print.
We created a guide of terms to watch out for in real estate contracts. We aim to ensure you are signing with confidence.
On Commissions
Commissions were paid by the seller under the old system. The changes now require sellers to decide whether to cover the compensation of buyer agents.
Buyers would have to decide what type of payment to offer their agent. For example, they can offer a flat fee or pay a percent commission. Buyers would also need to specify the services they need.
A flat fee could be more beneficial to buyers. Home prices have been soaring. Paying a percent commission would likely be worth more than flat fees for specific services.
Additional Fees
Some contracts can include terms allowing agents to charge extra fees. These could be retainer or transaction fees. Some fees can add up to $600.
It is important to note that fees are already covered by commissions. However, retainer fees could be necessary for long-term partnerships between agents and clients.
Conflict of Interest
Buyers should be aware of "dual agency" agreements. This means agents could also represent other potential buyers of the same property. Agents with "dual agency" agreements could also represent a specific property's buyer and seller.
"Dual agency" agreements are not inherently harmful. However, a dual agent may not have the best interests of either party in mind.
Termination of Agreement
The contract can sometimes include terms that would make the buyer liable to pay the agent's fees if they back out of the contract. Some terms may also allow agents to file legal claims against the buyer for terminating the partnership.
