In this third installment of the series about the changing landscape of real estate transactions, I am going to update you on what is happening in our marketplace since the rule changes took effect on August 13th of last year. This will include some of my personal experiences as a buyer’s agent and how real estate sales are currently being structured. If you are interested in reading the 1st or 2nd installment, the links are available here and the 2nd one is here.
The biggest observation since buyer broker agreements became mandatory in Oregon is that, for the most part, it’s business as usual. From August 13, 2024 to present, our team has put 14 deals into escrow. In each case the 14 sellers agreed to pay 2.5% buyer’s agent commission during the upfront negotiation. Any language in a buyer’s representation form about the buyer paying for services hasn’t been the reality. When writing an offer, the only way for the real estate agent to get paid is if the buyer’s representation agreement is already in place before the offer is signed. The reason being, if the buyer is on the hook to cover the cost of their own representation, then the buyer’s agent is acting in the best interests of the buyer in negotiating the payment of their commission by the seller. While it is ingrained in sellers’ minds that they need to pay 2.5% based on prevailing market conditions, we will continue to ask for it.
The Sitzer-Burnett trial settlement was finalized on November 26, 2024. Buyers representation agreements will remain mandatory for the foreseeable future to tour homes, outside of open houses. A commission agreement also needs to be in place before an offer is submitted in order for the payment of commission by the seller to be enforceable. Our brokerage has a history of not allowing the buyer’s agent to be paid a cent if this rule is violated so there is very strict enforcement. As discussed in a past update, in Washington State some agent’s commissions were returned to sellers due to them not following the rules exactly as they were laid out.
The Sitzer-Burnett lawsuit was initiated under the premise of listing agents not playing a role in determining the amount of buyer’s agent commission. This falls under antitrust law. Now that the settlement requires mandatory buyer broker agreements across the United States in order for a buyer to receive representation, the listing agent no longer has a role in determining the commission. However, the use of buyer broker agreements turn finding a realtor into a different type of process similar to hiring an attorney. From what we have seen, most real estate agents are being transparent and clearly explaining the provisions of buyer’s representation agreements. There are different versions but the most commonly used in Oregon is the Exclusive Buyer’s Representation Agreement written by Oregon Real Estate Forms (OREF), the same body that approximately 95% of agents in the state rely upon for documents related to the sales process. The agreement can be cancelled on 3 business days’ notice, so it doesn’t lock in buyers as long as the areas with financial penalties have $0 written in. However, there are provisions that have penalties for early cancellation of the agreement and a buyer not performing to the terms of the sale agreement, if the agent opts to leave them in. Our team does not leave any early cancellation penalties or non-performance penalties in the buyer’s representation agreements we sign with buyers. We make sure it is absolutely clear that we are not locking anyone into anything. After all, prior to the mandatory use of buyer broker agreements, we never used buyer’s representation agreements even though some other teams did. We stand by the quality of our work and never have needed to lock anyone into working with us.
Of the 9 buyers we have closed purchases with since mid-August, several negotiations were very complex. I’m not sure why these situations are coming up all at once but it does reinforce the need for an expert to represent you in such an important purchase. One recent transaction was on a past rental. I was able to secure a $15,000 seller paid credit that allowed my buyers to do a temporary rate buy down. Since the home was built mid-century, I made sure we checked for documentation of an oil tank on the property. An oil tank had been previously decommissioned at the property according to Department of Environmental Quality (DEQ) records. I still ordered a tank scan to search for additional tanks that may have been buried on the lot. This is not always standard practice if there is an already decommissioned tank but there can be secondary oil or septic tanks that may not have been discovered so it never hurts to check. A 2nd tank was found during the inspection. We had the oil tank remediation company investigate at the seller’s expense and they determined it was a decommissioned septic tank. That particular property also had elevated radon levels, attic mold, and a sewer line made of transite with root intrusion throughout the line. I brought in specialist contractors to bid on installing a radon mitigation system in the attic, remediatiate the attic mold, add additional ventilation and replace the sewer line. I managed to get the seller to agree to every repair which cost them an additional $20,000. The repairs were completed in short order and we would have closed on time if not for financing issues. My clients were required to switch from FHA to conventional financing in the middle of the escrow which required several days of working through cash flow and logistical issues tied to the transition. Typically lenders are in charge of these types of things but my clients relied on me heavily throughout that period since I have a background in underwriting loans prior to becoming a realtor. It all worked out and we closed a week late. My clients were thrilled that we were able to overcome so many hurdles and get the sale to the finish line.
Another very complex situation arose when representing a buyer of a 1990’s built home. The listing agent provided sewer and radon inspection results upfront since the seller had inspected before going on market. I noticed the sewer scope results were actually from a sewer repair company, not an independent 3rd party, so I brought in a trusted inspector to help. He ended up discovering that the sewer line crossed through the neighbor’s yard. We checked to see if an easement for access to the sewer line for repairs was in place. It turned out that even though the houses were built by the same builder at the same time, the builder had cut corners and there wasn’t any easement. The City of Portland determined the line was non-conforming and required the line to be rescoped to prove no party line was in place. Then the line had to be flagged and surveyed. An easement was written up and signed by the seller and neighbor. The easement was then recorded on the tax record and independently reviewed by the Nonconforming Sewer Department in Portland prior to closing. We got it done and I also negotiated for the seller to pay $12,000 in closing cost credits towards the cost of some other repairs the buyers were concerned about. If anyone less experienced had encountered this, the problem with the sewer line would likely not have been discovered. This would have been a hidden encumbrance that the buyers would have unknowingly taken on if I had not trusted my instincts to independently verify the line was good and then worked with the listing agent and several third parties to rectify the problem. Again, we closed late but a major logistical hurdle had been overcome. My clients were thrilled to move into their dream house.
Another extra step I take when representing buyers is reviewing HOA documents to help determine the financial health of the HOA on condo and townhome purchases. Lately what I have been seeing is not great in many cases. It appears most HOAs are badly equipped to cover recent increases in maintenance and insurance costs, without accounting for any future inflation. In some instances, I have instructed my clients not to buy specific properties because of an elevated risk of special assessments. A special assessment occurs when the HOA asks each individual owner to either pay them funds or take out a loan to cover major budget shortfalls. Special assessments can run anywhere from $10,000-$100,000 in extreme cases. Almost no buyers will purchase a condo or townhome without the seller agreeing to pay off any outstanding special assessment balance at closing unless the purchase price is heavily reduced to offset the expense. The issue is that many times special assessments hit years after the buyer has closed on the property. Certain specialized lawyers study HOA documents for a flat fee. I believe it costs approximately $1000-$2000 per transaction whether the sale closes or not. However, it appears most of the issues HOA’s are experiencing are more finance/accounting related and not legal in nature. I provide analysis of the HOA documents on condos and townhomes for my buyers without any additional charge. There is some random chance involved in an HOA having future solvency or not. However, I try my best to protect people with all the information available at the time of purchase.
I feel compelled to help people and will always look out for their interests over my own. That’s why I order extra home inspections in situations some of my colleagues might not deem necessary. I will absolutely talk a buyer I am representing out of buying a property if it’s not the right one. Many of my clients have experienced this. The best time to determine that is before you write the offer if possible. Inspections and appraisals cost money whether a transaction closes or not. It’s always in the buyer’s interests to find problems as early as possible. These recent experiences help clarify why having a very knowledgeable buyer’s agent is so important. There is no way all the complex repair issues I recently navigated would have been adequately resolved without someone knowledgeable to support my clients through these situations. The recent changes have made apparent some people think all realtors do is open doors. We do so much more – especially the experienced and best trained agents.
Our business has experienced two consecutive years of growth despite less home sales occurring in our local market relative to 2020-2021. My team had a record year with $16.75 Million in sales volume in 2024. I believe keeping clients informed played a key role in that. Consumers need to be informed, especially in an ever changing marketplace. We also were able to negotiate well over $300,000 in seller concessions while representing buyers. I am including price reductions, credits, and repair costs while excluding commissions from that total. The amount of concessions we negotiated was a record by a long shot. We also set a few price records on our listings, despite experiencing challenging market conditions at times. As a listing agent, I still manage to set a few price records every year. There are many things that factor into that including timing, cosmetic condition, location and the price point of each individual property. Most of the leg work to achieve those types of results is completed before the property is listed.
We are actively looking for more people to help with their real estate needs. Feel free to share this or any of my market updates with any friends, family or coworkers looking to buy or sell in the future. This winter is a great time to buy before there the seasonal pick up in home prices in the spring. The best time to sell will be here before you know it.