New Real Estate Commission Rules Explained: What Buyers and Sellers Need to Know in 2024

Let's begin with a quick overview of how real estate commissions worked before the recent changes brought about by the lawsuit Burnett et al. vs The National Association of Realtors et al.. 

When an agent listed a home, part of the agreement typically involved paying the listing broker a commission, usually ranging from 4.5% to 6%. While this rate was always negotiable, many agents had a minimum commission they would accept. The total commission was then split between the listing broker and the buyer's broker, often in a 50/50 split. For example, if the total commission was 5%, each side would receive 2.5%. 

In short, the lawsuit arose because a group of home sellers in Missouri were led to believe that offering compensation to the buyer's broker was mandatory and non-negotiable. This issue was worsened by the fact that many MLS systems required a non-zero amount to be entered in the Buyer Broker compensation field. 

Result: A settlement was reached between the plaintiffs and the NAR (More Info https://www.reuters.com/legal/litigation/us-realtor-groups-418-million-antitrust-settlement-wins-tentative-approval-2024-04-23/).  

In addition: 

• MLS listing agents are now prohibited from offering compensation to buyer agents directly on the MLS platform. However, this does not prevent sellers from offering a buyer broker commission. 

• Buyers must have a written agreement with their agent, outlining the agent’s compensation, before viewing any properties. 

• Any compensation agreed upon between the seller’s and buyer’s agents must be negotiated outside of the MLS system and disclosed upfront to all parties, including the seller. 

So, where are we today? 

Things have improved—at least from my perspective! 

As agents, we’re entrusted with significant responsibilities and compensation for our services. I believe this change brings more clarity than ever, ensuring that we demonstrate our value to both our selling clients and our buyers. 

Sellers 

First and foremost, you will negotiate the compensation you’re willing to pay your listing agent for their services in marketing your property and everything it takes to reach the closing table. This typically includes services like photography, floor plans, drone photography, advertising, and more. As agents, we’re entitled to ask for what we believe our service is worth, whether that’s a flat fee or a percentage. Similarly, as the seller, you’re entitled to interview as many agents as you like until you find one who offers what you're looking for at a price you are comfortable with. 

When it comes to offering buyer agent compensation, you have options. In my opinion, it’s always in your best interest to offer some form of buyer agent compensation (BAC). It’s simply an economic decision. Many buyers hire agents to guide them through the home-buying process, and a significant portion of these buyers expect to include their agent’s commission in the total purchase price. Why would you, as a seller, want to potentially exclude a large portion of the market? In 2023, 89% of homebuyers worked with an agent. Less exposure could lead to a lower sale price. 

Here are your options: 

1. Offer a Percentage: You can negotiate a specific percentage when you sign the listing contract. Then, when a buyer’s agent inquires, your listing agent can say, "My seller is offering X%." The buyer’s agent can share that information with their client and proceed with putting together an offer. 

1. Leave it Open: Your listing agent can say something like, "The seller is willing to entertain all offers." When you receive offers, you can consider the buyer agent’s commission request and calculate your bottom line accordingly. 

1. Opt Not to Offer Buyer Agent Compensation: You can choose not to pay a buyer agent commission at all. However, as mentioned earlier, this could put you at a disadvantage by reducing your market exposure. 

I believe it’s absolutely essential for listing agents to educate their sellers about both the listing agreement and the agreements buyers have with their agents. When a buyer asks the seller to pay X% in commission, it’s because they’ve already agreed to pay their agent that amount (or possibly more, if they’re covering part of it out of pocket). 

Buyers 

Just like sellers interview agents to list their home, buyers should also meet and interview agents that will guide them through the entire home-buying process—not just the home search. And, just like sellers, buyers can negotiate the compensation they’re willing to pay for an agent’s services. Agents have their own pricing structures, and you’re completely free to explore different options until you find one that fits your needs and budget. 

By "pay," I mean that if the seller doesn’t offer compensation for your agent, you may need to cover that amount yourself at closing. However, it’s important to remember that, in most cases, the buyer ultimately pays the agent’s fee, whether it’s included in the purchase price or paid directly. 

Why do I love this? It ensures that buyer agents must truly prove their value. Agents who don’t provide top-notch service or disappear after getting a house under contract won’t last long in this business. 

It’s important to note that this fee must be negotiated before you start viewing homes, and you’ll need to sign a buyer representation agreement. But there’s more! These agreements are flexible and can be negotiated for different time periods. Personally, I’m open to short-term agreements while we’re in the "getting to know each other" phase. These agreements can also be specific to certain properties if that works better for you. 

FAQs 

Am I required to have a buyer’s agent? 

No, not at all! You’re welcome to view homes as an unrepresented buyer. You can contact listing agents directly for showings or visit open houses on your own. I’ll be the first to say that not every buyer needs an agent. 

Why shouldn’t I go directly to the listing agent? 

The listing agent has a signed agreement to act in the seller’s best interest, meaning their job is to get the seller the most money and the best terms possible. I believe this is particularly worrisome for first-time homeowners who might get taken advantage of.  

Consider this extreme example: A listing agent assures a first-time buyer that the septic system is in great condition and has been functioning for years. The buyer, unaware of the importance of a septic inspection, decides to skip it. Then, a year after purchasing the home, the septic system fails, and the buyer is faced with a hefty repair bill. 

Won’t I save money by not using a buyer’s agent? 

Not necessarily. In fact, many listing agents have clauses in their agreements stating that if there’s no buyer’s agent, they may receive an additional X% for handling the extra work involved in managing both sides of the transaction. 

As a seller, why shouldn’t I just negotiate the buyer agent’s fee down? 

Keep in mind that buyers have signed an agreement with their agent for a specific commission percentage/fee. If the buyer can’t cover the difference out of pocket, it could jeopardize the sale. It’s often better to negotiate the total sale price, including the buyer agent commission (BAC), to ensure you still get the bottom line you’re aiming for. 

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A Guide to a Cozier, More Energy-Efficient Home or Apartment

Imagine your home as a cozy sanctuary, shielding you from the bitter winter winds. However, if your house is harboring tiny cracks and crevices, it's akin to leaving your air conditioning on during the coldest months. Those sneaky drafts can drive up your heating bills. But fear not, as there are simple and effective ways to seal your house and make it a haven of warmth and energy efficiency.

1. One super easy way to track down air leaks is to play detective with a candle. Light it in a room you suspect of having drafts and observe if the smoke is drawn toward any doors or windows. If it is, you've identified a potential leak. Locking windows and applying weather stripping can help keep these drafts at bay.

Weather Stripping

2. Embrace the Sun's Power: If a room is blessed with direct sunlight, open those blinds and let the sun work its magic. Sunlight not only brightens up your space but also warms it naturally. Remember to close the blinds once the sun bids adieu to maintain the warmth.

3. Battle the Draft with Door Snakes: As annoying as they might seem, door snakes placed at the foot of drafty doors are surprisingly effective. Since cold air tends to sink, it often enters from below. A simple door snake can act as a barrier, preventing chilly drafts from sneaking into your home.

Door Snakes!

4. Caulking Cord Magic: One of my personal favorites is using caulking cord to fill gaps in loose or drafty windows. This temporary solution can easily be removed in the spring without causing any damage to your paint. It's a quick fix that makes a significant impact on energy efficiency.

Caulk Cord

5. Window Insulation Kits: While not the most aesthetically pleasing, window insulation kits are a cost-effective solution to enhance your home's energy efficiency. These kits create a barrier against drafts, helping you save on heating costs without breaking the bank.

Window Insulation Kits

6. Spray Foam All the Way: Take a leisurely stroll around your house and fill any holes (where cables may have been or still are etc.) where pesky cold air might be making its way in with spray foam. The bonus? It can also act as a barrier against insects and other pests, keeping your home comfortable and critter-free.

Great Stuff Spray Foam

7. Attic Hatch Defense: Don't overlook the possibility of cold air infiltrating through your attic hatches. Consider creating a box out of rigid foam to cover them. If DIY isn't your thing, premade attic door insulation covers are readily available, providing a hassle-free solution.

Attic Door Covers

8. Basement and Crawlspace Protection: Cover basement windows with foam board to provide an extra layer of insulation. Additionally, during the winter, shut and cover any crawlspace vents to keep the cold at bay. Just remember to open them back up when spring arrives.

By implementing these simple and budget-friendly tips, you can transform your home into an energy-efficient haven. Seal those drafts, embrace the warmth, and watch your heating bills take a welcome dip. A cozier, more energy-efficient home is just a few steps away!

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Thinking about Selling? Read this before making any improvements!

Wondering what home improvements add the most value in Connecticut? In this post I’ll cover the different ways you can add the most value to your home, as well as things that probably aren’t worth doing.

 INTERIOR

 Kitchen

 There’s no denying that the first thing many buyers look at is the kitchen when browsing homes online. But is renovating your kitchen worth it? I may be in the minority here but I don’t think so. According to remodeling.hw.net (link below) a minor kitchen remodel will recoup 70.3% of what you put in and a major kitchen remodel will recoup only 55%!

My thoughts on dated kitchens before selling is this: Do the bare minimum and let the future buyers make the kitchen their own. Things like painting cabinets, changing hardware, and a professional cleaning can go a long way in freshening up the kitchen’s look without costing you an arm and a leg.

 Bathrooms

 Along the same lines as Kitchen’s, you simply aren’t going to get your money back when doing a major bathroom renovation. A professional cleaning and some minor updates and paint is probably all your bathroom needs before going on the market.

 Floors

In my opinion dropping your money on your floors is worth it…pun intended. Refinished hardwood floors give an amazing first impression in both photos and as soon as potential buyers walk through the door.

Replacing old carpet is going to do the same, and they will help mitigate any pet odors etc. if they are present.

Both things are relatively inexpensive monetarily but obviously can cause a logistical headache with moving furniture etc. So, they are much easier to do with a vacant property.

 Walls

 Probably the easiest way to add some value and freshen the look of your home. Stick with a neutral palette to make it easier for buyers to envision their things in the home.

 Don’t forget about the trim and molding!

EXTERIOR

 Landscape

What’s the first thing buyers see when they come to look at your home? The exterior and the landscape. Curb appeal!

Not only is nice landscaping appealing to the eye it also shows the buyers that you care for your property.

Keeping the lawn mowed and mulching around shrubs and trees is a great start. If you plan on planting shrubs and perennials before you sell make sure they are low-maintenance so that potential buyers are not put off by a garden that will require too much of their time.

Garage Door Replacement

According to this study garage door replacement will recoup the most money out of all of the upgrades you could do!

It makes sense to me, new garage doors will be one of the first thing a buyer sees and they’ll give the home an updated look right out of the gate.

Front Door

If it’s a very old door, consider replacing it with a new steel door in a bright attractive color. A new door will promote energy efficiency and curb appeal at the same time.

If the door is in decent shape but the sun has done its toll on the paint, liven it up with a new coat.

Windows

Windows will be one of the first things buyers look at. If you already have dual pane windows, consider cleaning/repainting and replacing any that have a broken gas seal (foggy ones).

If you have single pane windows and don’t plan on selling right away, I would at least think about updating them. You will save on energy in the meantime and make a good amount back when it comes time to sell.

Roof

This is the big one that everyone asks about. The last thing buyers want to see when they look at the property disclosures is “Age of roof: 25 years”, which translates to “In the next 5 years I’m going to have to cough up $15k-$30k+ for a new roof.

My general thought here is that if your roof is over 20 years old and you have the financial ability it is at least worth considering doing the replacement before you sell. It’s going to look better in person, it’s going to look better on the market and it’s a huge thing that the buyers won’t have to worry about.

Regardless of age if you aren’t replacing it and it has a lot of moss/lichen build up, have it treated and cleaned.

Gutters

Who wants to pull up to a house and see leaves spilling out of the gutters? Its ugly and it makes it look like you don’t care about your property. It’s not expensive to have your gutters cleaned and it’s worth it.

HVAC

At a minimum have your HVAC system serviced and have the service records showing for buyers and home inspectors to see. A furnace with no service tag on it is often seen as a red flag.

If the furnace and/or AC unit(s) are ancient history, replacement wouldn’t be a terrible option. Like the roof they are big ticket items that buyers don’t want to think about replacing soon.

Final Thoughts

Homes are complex systems with a lot going on. I tried to cover major items and “bang for your buck” items in this post. There are obviously a ton of things you can do to improve your home’s value and aesthetics and I didn’t cover them all here!

Happy to talk more about this topic and answer any questions you may have!

Here is a link to the data I mentioned: Home Improvement Value

How are property taxes calculated in Connecticut?

This is a very basic breakdown of how property tax is calculated.

In Connecticut your property tax is calculated using estimated fair market value, tax assessment and your town’s mill rate. Confused yet? Its easiest to explain with an example.

Let’s take a home with a $300,000 market value. In Connecticut tax assessments are 70% of the market value, in this case the home would have a tax assessment of $210,000.

A “mill” is $1 of tax for every $1000 in assessment.  If you have a town with a “mill rate” of 35 it means that for every $1000 in assessment there will be $35 in property tax. So, for this example we would take the tax assessment of $210,000, divide by $1000 and multiply by 35 for an annual property tax of $7350.

I plan on expanding on market value, how and why assessments change, and how your municipality determines your mill rate in future posts.

In the meantime, if you have any questions don’t hesitate to reach out!

You can't ignore property tax! Especially When buying a home in Connecticut!

Home buyer’s in Connecticut are often caught off guard by property tax because it varies so much from town to town. Property tax is going to have a drastic effect on whether you can afford a property or not. You may be preapproved for 300k in one town but 250k in another just because of the property tax.

Why you need a buyer's agent in Connecticut!

I’ll be honest this was tough to write because I think it comes across as salesy. I promise I’m not writing this with the intention to deceptively convince you that you need a buyer’s agent so that I potentially get new business. I find the following to be incredibly important information for home buyers to be made aware of.

Dual Agent: A real estate agent acting on behalf of both the buyer and seller in a transaction.

I should also note that as a buyer you typically do not pay your agent. The buyer’s agent’s commission is paid by the seller of the property. A dual agency situation does not save the buyer any money necessarily, in most cases it just makes the dual agent more money.

Disclaimer: I think most real estate agents are very capable of acting as dual agents and doing it as fairly and ethically as possible. At the end of the day, however, we are all human and it is near impossible to represent both sides in a transaction equally. After all, there is a reason that in some states dual agency is illegal. I’m adding this disclaimer because this topic is probably going to come across as somewhat negative.

Conflict of Interest 

First and foremost, the listing agent is under contract with the seller to act in their best interest (make them the most money possible). The listing agent has a fiduciary duty to the seller, and if a listing agent breaks that fiduciary duty their license to practice real estate could be put in jeopardy.

A fiduciary is a person who holds a legal or ethical relationship of trust with one or more other parties.

A seller/listing agent relationship typically starts with a listing appointment where they discuss things like listing price, getting the house ready for photographs, things the seller could change or repair, how showings will work etc. this process could take weeks or months as they work together to get ready for market.

The house is listed, and a buyer contacts the listing agent, falls in love with the house and wants to make an offer.

This is where conflict of interest comes in. Is the listing agent going to be able to casually put aside the relationship previously formed with the seller and truly represent both side’s interests to their full potential? It’s a massive risk to think that they can.

The Information Spin

A price is agreed upon, a contract is formed. It’s time for the home inspection. The buyer hires a home inspection company and finds out the house has a bunch of issues. Mostly minor issues that come up regularly during inspections but there are also a couple of major issues that worry the buyer.

The buyer brings the issues to the agent, and how does the agent react? The agent brings the issues up with the sellers and they might say something like “Oh, it’s been like that since we bought the house and we’ve never had a problem.” The agent then downplays the issue to the buyers and because the buyers are not in real estate, they trust the agent and disregard a major home inspection issue that should have been addressed in some manner.

A buyer’s agent working exclusively for the buyer would not have let the issue just slide by.

Disclaimer: This is an example of a worst-case scenario. There are dual agency situations where home inspection issues are addressed to the buyer’s liking.

Increasing Skepticism 

The buyers are through inspection, and everything is looking good. Then the buyer’s attorney finds out that permits were never pulled or closed for certain modifications. The agent says not to worry everything was done by a licensed contractor we should proceed with closing as planned. The buyer starts to question the entire transaction thus far and its difficult to get back to the positive excitement felt at the beginning of the process.

To avoid all of this get yourself a buyer’s agent. As mentioned earlier the seller (in almost all cases) pays the buyer’s agent commission, so why put yourself in a dual agency situation if it does not save you any money? And possibly ends up costing you MORE money.

Happy to discuss this more and hear your thoughts/questions on the matter!

Considering going solar in Connecticut? Read this first!

With utility companies seemingly increasing rates across the board I’m seeing and hearing a lot more chatter about installing solar panels. There is no doubt that for some homeowners it can save them a TON of money. However, make sure you are doing your due diligence before signing on the dotted line. I hate to sound pessimistic but sometimes it is a terrible idea. It could hinder a future sale and/or you may just not save any money.

First and foremost, you need to have a solar audit done to see if your home is a good candidate and how much electricity your system could produce. Southernly facing roof with little to no shade from trees or other obtrusions? Good chance that you’ll be able to produce a lot of electricity. Keep in mind that geographic location matters too, sunlight hours are going to vary. Panels in Arizona are going to get more sunlight per year than panels in Maine, especially when snow is taken into consideration. Ideally the auditor won’t be someone that benefits from giving you an inflated estimate of how much electricity your system could produce.

So you’ve got your audit and you know how much electricity your system will potentially produce on a yearly basis. Now you have options.

Buying Outright

If you can do it, this is the best option. No interest or monthly payments to worry about. You will also add value to your property by doing so, however at a steep discount compared to what you paid. A typical system may cost in the range of $20k-$30k but only add $10k-$15k in the eyes of an appraiser. Definite cost saver in most cases if you plan on owning the home for 10+ years. If you plan on selling sooner than later there are better investments.

Financed Purchase

Use your solar audit to figure out when your break-even point should be. For example, if your typical electricity bill is $300 a month prior to solar, and you expect to save 50% that equals $150 per month in savings. If your system paid in full with interest costs $35k its going to take a little over 19 years to start capitalizing on the savings.

A financed solar system does add value to your home, however, if you sell the home before its paid off you will need to do so at closing. Or you can always keep paying for something you no longer own.

Leased System

They can save you money, but you need to read every line of the lease and make sure the math works out. When it comes to solar leases make sure you are shopping around and not just going with the first company to knock on your door.

Most solar leases come with an escalation clause that’s going to increase your monthly payment over time to stay on par with rising utility rates.

Leased panels do not increase the value of your home. In fact in many cases they can become a hindrance to selling because you will either have to buyout the lease (exorbitantly expensive usually) or the buyers need to qualify to take over the lease.

Anecdotally, when I have buyer clients looking at a house with leased panels (or any panels for that matter) I ask for a copy of the lease agreement, to see what the monthly payments are and will be as well as the buyout amount. I also ask for a copy of historical utility bills prior to the panels being installed. On 2 occasions when comparing the lease payments and utility bills I found the homeowners to be losing a substantial amount of money in the long term even when factoring in a yearly rise in electricity cost.

Solar leases can save you money, but you need to shop around, read the fine print, and do the math.

Homebuyers should ask the following:

1.    Does the system actually save the homeowner money?

2. Is there maintenance involved? (One of the positives of a lease is no maintenance)

3.    What if the roof needs to be replaced?

4.    Do I need to qualify for and take over a lease?

5.    Do the panels detract from the curb appeal and potential marketability?

6.    What is the system’s life expectancy? Am I going to need to deal with removing them soon?

Need to sell your home with solar panels?

1.    Make it easy for the buyers to form a decision, have utility bills etc. ready to go so you can show off your savings.

2.    Document the yearly cost of maintenance.

3.    Be prepared to pay off the loan or lease if necessary.

At the end of the day, solar can and most likely will save you money in the long run. Just remember to do your research and make sure its the right decision for your given circumstance...and make sure you read the fine print.