It’s extremely disappointing to witness a supposedly reputable news outlet disseminating such a misleading and potentially detrimental clickbait message to both buyers and sellers in the wake of yesterday’s NAR announcement regarding a proposed settlement – which by the way has not yet been accepted in a court of law and ratified by a Judge.
✔️ It’s important to recognize that there has NEVER been a fixed “standard” commission rate of 5-6%. Over the years, we have seen listing agents charging as much as 10%, while buyers’ agents sometimes receive as little as $500. This variance highlights the lack of a true standard.
✔️ While commissions aren’t being eliminated, proposed changes suggest negotiations will become more intricate and convoluted.
✔️ The proposal involves removing language in MLS listings regarding payments to co-operating (aka Buyer’s agents) brokers.
✔️ There’s a common misconception among sellers that they solely bear the financial burden of selling a home, while buyers incur no costs. This is completely inaccurate. In reality, buyers fund the entire transaction, including all commissions, even those of the sellers, because they are the ones buying the house and these costs are essentially a part of that price.
✔️ Many sellers may believe otherwise due to the language in their listing agreements. These agreements typically state the percentage charged by the listing brokerage and specify that a portion of this percentage, often half or close to half, is paid to the buyer’s brokerage at closing if the buyer is represented by an agent. This is like a marketing fee, to entice buyer’s agents to bring their buyers to a property.
✔️ Despite buyers contributing all the funds at closing, it may appear on paper that sellers cover all commissions, leaving buyers seemingly paying “nothing,” which is misleading.
✔️ In the scenario outlined in the headline, BOTH listing and buying brokerages would each receive 3% (or 2.5% or whatever is agreed upon in negotiations), from which brokerage fees, referral fees, and commissions are deducted. So how exactly did the commissions go away? It has always been split along these lines.
✔️ Real estate agents are not ALL members of NAR. And NAR has never set commissions even for those who are members.
✔️ Previously, all parties could cover their representation costs at closing, without direct payment out of pocket. Now that’s changing, and buyer’s may have to come out of pocket if they want to pay their own agent to represent them which is going to be a challenge for lower income brackets. Currently these costs cannot be financed.
✔️ The evolving nature of this “news” has not yet been fully settled or approved. A few months ago, media reports suggested that sellers would no longer need to pay buyers’ agents. However, this overlooks the potential reduction in listing brokerages’ earnings per transaction.
✔️ The potential consequence of this is that sellers, under the impression that they cover all costs, may choose not to adequately compensate the listing brokerage, resulting in many buyers, including VA buyers, being unable to enlist the help of a buyers’ agent.
✔️ The prospect of buyers navigating one of the most significant transactions of their lives without professional representation is deeply concerning. It could mean that they go to the listing agent directly, which is essentially like using the other guy’s attorney if you were in a lawsuit. That attorney is representing their client, not you, and will use that power to negotiate AGAINST you. And trust me, as a professional real estate agent doing this full-time for as long as I have, I can out negotiate the average Joe.
✔️ Consider the myriad tasks involved: researching available properties, liaising with lenders, scheduling showings, conducting comparative market analyses, negotiating offers, coordinating with title companies, navigating inspections and appraisals, and managing contractual deadlines—all while balancing work, family, and other responsibilities. There’s actually about 180 tasks a good real estate agent does in a transaction.
✔️ I’ve been a part of this industry for 17 years, and while I’m apprehensive about these changes, I’m confident we’ll adapt and find equilibrium. My commitment to protecting my clients remains steadfast and I welcome the use of Buyer Broker Agreements which are becoming mandatory for clarity around a real estate agents duties and compensation model.
✔️ However, I’m genuinely concerned for sellers and buyers in the coming years who may misinterpret headlines and believe they can manage without a licensed realtor or that they can’t afford one. This misinformation unfairly disadvantages buyers, with the hardest hit being first-time and VA buyers.
✔️ While successful transactions have occurred without realtors, the risk of contractual violations and ensuing lawsuits outweighs any perceived benefits of bypassing professional representation.
I’ve said from the beginning that this whole lawsuit against NAR was a legal play. The class members it appears will receive about a whopping $2,000 a piece whereas the attorneys involved will receive about $80,000,000. Yet the premise of the lawsuit is that real estate agents are overpaid…and here the attorneys sit making 30 to 40% (somewhat standard I hear!) of a class action lawsuit, where the class members divvy up the rest, which often amounts to not much, as evidenced here. But yeah, sure, we’re overpaid. We get no health insurance, no 401K, no days off… I digress.
And attorneys will continue to reap further rewards when buyer’s feel they were not represented well if they go to listing agents directly. I hope buyers don’t do that. I HOPE that buyers will understand it’s critical to use your own real estate agent in the biggest financial transaction of your life, and that that cost may be able to be rolled into the transaction as a closing cost.
A lot remains to be seen as far how this plays out with Fannie and Freddie, and the VA prior to the July 2024 implementation date. Stay tuned.
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