I know the media has headlined the upcoming changes in real estate and many questions are being raised about the National Association of Realtors (NAR) proposed Class Action settlement terms. While this vision of slashing home prices appears promising, the immediate reality suggests a more complex scenario as the industry, along with buyers and sellers, determine how the proposed changes will really impact them. I do think transparency in any industry is positive yet, I do not pretend to know how this will all shake out for my buyers, and sellers, as the headlines continue to create chaos, confusion & emotion.
After reading through the proposed settlement statement that must still be approved by the courts I want to go beyond the headlines and talk about some of the underlying details as I know them. Aside from the millions of dollars that will largely be paid out to satisfy the legal-related costs in this suit, here is the heart of the proposed settlement as I understand it today:
● Multiple Listing Services (MLS) will no longer be able to include an entry for the Buyer Agent Commission (BAC). This will be removed from all MLS’s.
● Buyer Agents cannot show homes to any buyer without first having a Buyer’s Agent agreement in place on day one outlining their fees.
● Sellers will still have the option to openly offer a “concession” (not a commission) that can be used towards the Buyer’s Agent fee, Closing Costs or Prepaid Expenses. However, this cannot be listed in the MLS, although it is still unclear whether the “open” offer of a concession can be made in the description of the property.
● Listing Agents can still offer to share their fee with the Buyer Agent outside of the MLS.
This is a learning experience on all sides, but I am committed to open and transparent conversations about what is right for you as the client. Some sellers may opt for buyers to cover their fees separately, yet, when viewed in the bigger picture the potential savings of 2.5 to 3% could be counterbalanced by narrowing the buyer pool to those with the financial capacity to pay their agent. Some sellers will choose to widen the pool of potential buyers by offering to include this in the price of the purchase. There will be new rules around all of these choices.
Needless to say, there are many questions on how this will be implemented and ultimately play out with the ramifications of these changes presenting both advantages and challenges for all parties involved. Will sellers indeed reduce prices by 3% to accommodate the buyer’s ability to pay their agent separately? Can lenders adapt lending rules to enable buyers to finance buyer broker commissions? Will brokerage fees experience drastic reductions, leading to a more favorable environment for consumers in the coming years? Will buyers sign an agreement with anyone that will show them a home, or will they become selective when paying for these services?
Ultimately supply and demand are what drive prices in the housing and most other consumer markets. Buyers will still seek competent help when making such a significant financial purchase. Sellers will likely see some cost savings by shifting the burden to the buyer unless the market changes and inventory increases significantly, where they may choose to pay for these fees as an inducement to their marketing strategy. There will be more negotiations that occur throughout the process.
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One of the complaints levied by the Consumer Federation of America is that a glut of part-time agents has led to widespread incompetence. Stephen Brobeck, CFA Senior Fellow states, “The residential real estate industry is truly a part-time industry with most agents working sporadically and holding another job, often full-time. There is no other financial services industry or profession where part-time, marginal workers are so ubiquitous.” Rest assured that Linda Heinrichs is a full-time, 100%+ Real Estate Broker who is focused on her fiduciary duties and perfecting the craft of her Real Estate business through education-enhancing training and industry experience.