Starting in July, the real estate in United States is preparing for a deep reorganization thanks to a $418 million deal offered by the National Association of Realtors (NAR) to overhaul its entrenched agent commission structure and pay compensation to the real estate salespeople and brokers who sued it.
The NAR received a new blow on April 5, when a federal court cleared the way for the Justice Department reopened an antitrust investigation into the group and its rules regarding commissions on home sales.
Although the agreement is pending final approval at the end of the year, the preliminary approval given Tuesday by a federal judge means the outcome is very likely. In addition, the institution has already begun planning changes to some of its policies starting this summer. Although are likely to affect buyers more than sellersboth sides will have to make some adjustments, including how to work with agents.
Although commissions have always been negotiable, sellers typically reach an agreement with their agent, who then splits the compensation (typically 5% or 6%) with the buyer’s agent by agreement with the seller. However, under the agreement, sellers can no longer advertise an offer to compensate the buyer’s agent in real estate databases known as multiple listing services (MLS).
The lawsuit alleged that advertising commissions kept fees artificially high because buyer’s agents might be more likely to direct their clients to properties where the owners offered the highest compensation.
Starting now, buyers who hire their own agent will be required to sign a document, known as a “buyer representation agreement,” that explains how their agent will be paid.
These agreements as such are not new – 18 states, as well as many real estate agencies, already require them – but the scope of negotiation around the commission may change, with greater transparency for buyers. And some sellers may choose not to offer to pay the buyer’s agent.
According to Todd Luongreal estate agent RE/MAX DFW Associates in Frisco (Texas), the reorganization could result in different commissions depending on the level of service, freeing buyers to pay only for the services they want.
For example, buyers can pay a flat fee to an agent that covers only basic services, such as showing a home, making an offer or assisting in negotiations. You can also pay an hourly rate.
There is a widespread idea that the seller “pays” all the commission that is distributed among the agents. But, in reality, “buyers have always paid a real estate agent’s commission when they buy a house” because it comes out of what they pay the seller, says Suzy Minken, a real estate agent at the real estate brokerage. compass in Short Hills, New Jersey.
The new changes could lead more buyers to not hire an agent at all. This would mark a change from current practice, in which more than 90% of buyers and sellers work with an agent, according to the NAR.
If opting for an agent, buyers may want to first review several candidates to compare services and costs, as they have flexibility to negotiate the agent’s commission. But they should also remember that they probably won’t know before making an offer whether the seller will pay the buyer’s agent commission, so the payment will likely be part of the purchase negotiations, Luong said.
“Sellers may want to look at the offer price and all terms of the offer first before deciding what, if any, buyer’s agent commission they are willing to pay,” Luong said. “Negotiations between buyers and sellers are only going to get more complicated” once the deal goes into effect, he added.
Probably. For example, first-time homebuyers or other buyers who are strapped for money might struggle because they are less likely to afford a lump sum payment to the buyer-agent fee if the seller doesn’t cover it, he said. minken.
Buyers who use mortgage loans could also be affected. Veterans Affairswho are prohibited from paying real estate commissions under the current loan program, Luong said.
“The borrowers of GOES “They would be at a disadvantage when making an offer on a house where the seller did not pay compensation to the real estate agent,” Minken agreed.
“The already tight inventory could be reduced even further if sellers ‘uncouple’ real estate agent fees traditionally paid and not provide a compensation offer to the buyer’s agent,” he added.
Still, more generally, sellers can offer credit to the buyer to close the deal, “and buyers can use that money however they want at the closing table, including paying their agent’s commission,” Luong said. .
If you are planning to buy a home in the next few months, and you are worried about your liquidity, you may want to close a deal before July, because there is less chance that you will have to pay your agent’s commission with cash in hand. effective, Luong said.
The broader debate remains over whether the deal’s changes could affect house prices. Some researchers argue that buyers could benefit because house prices would fall, arguing that the high commissions of the traditional structure are incorporated into the sales prices because sellers want to cover their costs.
He real estate has disputed this claim, citing data suggesting little correlation between commission percentage and sales price, and that prices depend on supply and demand, not commissions.
The biggest change for sellers is that their agents can no longer make compensation offers through the MLS. However, your agents can still negotiate commission offers with the buyer’s agent outside of the MLSas long as they disclose the resulting agreement to both the buyer and the buyer’s agent, he said Bess Freedmangeneral director of the real estate brokerage Brown Harris Stevensbased in NY.
Real estate agents maintain that commissions remain a valuable incentive for sellers, as they are “interested in showing their property to as many potential buyers as possible,” he said. Mark Pessintraining director of Realty ONE Groupbased in Carlsbad (California).
But in a strong housing market, sellers are more able to “negotiate lower commissions or put more pressure on buyers to cover more out-of-pocket expenses,” Pessin added.
Conversely, if the market cools, sellers should be more willing to make concessions to cover the buyer’s closing costs, he said.
But even independent analysts anticipate that sellers are likely to continue turning to agents after the new policies are implemented, in contrast to the greater upheaval on the buyers’ side.
Under the terms of the agreement, sellers could continue to face an additional series of contract negotiations that used to be addressed before the first showing of their property, as both parties have to reach an agreement on commissions in a separate avenue outside of the MLS, Pessin noted.
“This added obstacle created by this possible agreement may positively or negatively influence the final sale price,” he said.
Sellers may also refuse to pay a commission to the buyer’s agent. But it’s not always the best decision, especially if industry practices and market conditions change: In these cases, buyers could make a lower offer if they have to pay their agent’s commission separately, or they could choose to do not make any offer.
Alternatively, sellers could offer to pay some or all of the buyer’s agent commission at settlement; In the first case, the buyer would pay the remainder directly to the buyer’s agent.
If sellers don’t want to pay the buyer’s agent, buyers will have to pay their agent’s fees based on the terms of the buyer’s representation agreement, Minken explained.
It is essential that the home sellers recognize that this situation continues to evolve, Pessin said, adding: “Selling agents and buying agents are awaiting the outcome and will adapt their business practices accordingly.”
And despite the changes in the store, Pessin urges sellers to take into account the many other factors that will shape their offering to buyers, such as market conditions, buyer demand, pricing strategies and interest rates.
Finally, sellers should remember that there is always room for negotiation, regardless of the solution to the problem. NARFreedman said.
“Have an open conversation about how you would like to structure the commission. As always, commissions are negotiable, and a good agent will be transparent about this process,” he concluded.
Washington Post
