03/15/2024
Today, NAR submitted a proposal to settle the ongoing commissions based lawsuit. The positive in this is that it gives the government essentially what it was after, and stops the expensive ambulance chasing effect where copycat suits were cropping up, suing multiple brokerages across the nation, not just the major players, but all of them. The results of this, were it to continue, would have been to put many small brokerages out of business. Anyone who has agreed to be part of a class action lawsuit knows that you the consumer receive very little in the way of compensation if your case is won. It's often a few dollars at best. Where the rest of a settlement goes, I will leave up to your imagination.
While I am glad this is settled, and the smaller brokerages will remain as vital competitive forces in the market place, I am also deeply troubled by what I feel the outcome will be. Two significant changes to the consumer will happen in July:
*First, is that buyers will be forced to enter into agreements with their agent as to how much compensation they are willing to pay them for their expertise, time, and services while representing them in a transaction. More on this in a moment.
*Second, the MLS will no longer indicate to an agent how much, if any compensation a seller is willing to offer to a buyer's agent if they are bring a buyer who purchases their home. Keep in min, this has always been a negotiable item.
The MLS piece of information is a distinct change, but the amount of commission offered has always been negotiable. I get it, nobody wanted to only offer a 1% commission, because it was not competitive with 3%. And agents, who get paid for their services, would much rather be paid 3% than 1%. So there was an informal pressure to pay at least 2 1/2% and usually 3% to be competitive. The net effect of this will be this, sellers will pay 0, nothing. The default will be if I don't have to, why should I? And I cannot blame them.
This honestly doesn't concern me as much as what will buyers now do? Well, it's going to be one of two paths. You negotiate with an agent who you feel will represent you and your needs the in the best manner possible, and you will be contractually bound to pay this agent at closing for their services. In this case, say for example you agreed to pay 3% of the home price, and the seller had agreed to pay 1%, the buyer would pay 2% at closing. If the seller agrees to pay nothing, the buyer will pay the entire 3%. For many buyers, they will find a rate which they feel comfortable paying, and will be fine with this arrangement.
My real concern is for buyers with more limited funds, such as new home buyers or those on fixed incomes. They may be forced into self representing and will be at the mercy of the sellers agent. You see this often with new home purchases, where a client does not see the need to have an agent. For savvy buyers, this is not as much of an issue. But ask yourself this question: do you always know what to pay for a home? Do you know the rules regarding inspections and timelines, how to ask for repairs? Do you know how to cure notice a seller who has not made repairs in a craftsman like manner or timely fashion? The point is, you will likely need assistance at some point.
The one change I want everyone to be aware of, is that for buyers, we will need to sign a buyer broker agreement going forward. This will not be just me, this will be every agent out there. My commitment to you is that I will always be fair, and keep your best interests in mind. Together we will determine something that works for both of us.
