R
eal estate contracts have become even more complicated, with buyers now required to sign agreements with their agents before starting a search. These "Buyer Representation Agreements" specify fees and services, but can be dense and deceptive. A recent $418 million settlement with the National Association of Realtors has led to changes in commission structures, making it essential for buyers to scrutinize the fine print.

    The new rules have resulted in modestly lower fees, with the average commission per agent decreasing from 2.62 percent in January to 2.55 percent in July, according to a Redfin report. Sellers are no longer responsible for paying commissions for both sides, shifting the burden onto buyers to negotiate their agent's fee and services before starting a search.

    Buyers should be aware of several key issues when reviewing contracts:

    Commissions: Buyers can opt for flat fees based on their housing budget or negotiate a percentage-based commission with their agent. It's essential to clearly outline payment and expectations upfront.

    Additional fees: Administrative, transaction, or retainer fees can add up quickly, often totaling hundreds of dollars. These fees should be justified and disclosed in the contract.

    Cash payments: Concessions, bonuses, or rebates from sellers to buyers can offset costs, but may also create conflicts of interest if not properly disclosed.

    Conflict of interest: Dual agency agreements can harm both buyers and sellers due to inherent conflicts of interest. Buyers should discuss and approve any changes to their agent's role.

    Termination: Contracts can make it difficult for buyers to back out without facing fines or legal claims. It's crucial to understand the termination clause and potential consequences.

    Default fees: If a buyer walks away from a deal unilaterally, they may forfeit earnest money and potentially pay agents' fees. Buyers should ensure contingency language covers potential risks and default penalties.

    Arbitration: Some contracts include binding arbitration agreements that limit buyers' ability to take disputes to court. This can be risky, as it forces consumers to resolve complaints through mediation or arbitration.

    By being aware of these key issues, homebuyers can navigate the complexities of real estate contracts and protect their interests.