By Franklin Schneider
Wealth of Geeks
Wealth of Geeks
Real estate agents who represent buyers brace for change after the National Association of Realtors (NAR) agrees to a $418 million settlement in an antitrust lawsuit. The settlement is set to go into effect in July, and includes several new rules that will change how real estate commission is paid and how buyer’s agents are compensated.
The rule that will affect buyer’s agents the most forbids sellers from listing a buyer’s agent compensation in their listing. That means sellers will no longer be required to pay commission for their own agent and the buyer’s.
Traditionally, sellers paid both agents, with each making around 3% on the transaction. Under the new rules, sellers will pay only their own listing agent, while buyers will be responsible for compensating their agent — on top of other home-buying expenses, such as their down payment and closing costs.
Industry experts have speculated that to save money, buyers may choose to buy homes without using an agent at all. Instead, they may use online real estate platforms, such as Zillow or Redfin, to find properties and then negotiate directly with the seller’s agent.
However, veteran buyer’s agents say home buyers can’t afford to forgo an agent. Trying to navigate a competitive market and a complicated buying process leaves buyers vulnerable to missteps, exploitation, and remorse.
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Added value
To navigate the home-buying process alone would require a crash course in everything from negotiation to title insurance. Buyers in a post-settlement market are likely uncomfortable with processes they may experience just once every 10 to 20 years.
“If we were buying and selling a home every single year, it’d be [different],” says Seattle-based real estate agent Jeff Dickinson. “People are staying put. The average person is moving every 15 or 20 years versus every five years. We just don’t do this often enough to really know how to do it as a consumer.”
Although there are no rules preventing buyers from negotiating commission with listing agents directly, it almost never happens, Dickinson points out, which suggests the average buyer simply isn’t up to the task.
“I’m doing 65 listings a year, and it has been probably four years since I had a buyer directly come to me and say, ‘I want to bypass an agent. I would like to have the [buyer’s agent commission] so I can apply it toward my closing costs,’” Dickinson explains. “I just never get these calls, and I’m very easy to find.”
For novice buyers, the home-buying process can be complex and emotionally overwhelming. Dickinson suggests leaning on buyer’s agents for crucial help on both fronts.
“Buyers, no matter how seasoned they are, always seem to need a human agent to assist them with the process, [if only as] part psychologist,” he says.
Buyer’s agents can offer apprehensive buyers more concrete expertise beyond hand-holding. There’s always more to a property than meets the eye, and buyers without an agent may not know what questions to ask, shares Mary Alice Beevore, an agent based in Minnesota.
“Finding a property is relatively simple with all of the online real estate aggregator sites. The real challenge begins when you decide to start the process of purchasing real estate,” Beevore says. “A knowledgeable broker will not only help arrange for physical inspections, they will also assist their clients in checking on non-physical aspects of the property.”
Beevore elaborates, “Has a permit been pulled for the vacant land next door? Is the property in a zone known for pollution? Are the school district boundaries going to change? Does that shared driveway have a maintenance agreement? The list goes on and on.”
Basic homebuying elements, like offer submission, are often more complicated than texting a number to the seller, says Bay Area real estate agent Cindi Hagley.
“I have never had an offer made without a buyer’s agent involved,” she says. “I wonder how seriously a seller would consider it. If you write your own offer, you need to be aware of all the elements.
“Have you requested and reviewed all disclosures and natural hazard reports? Have you reviewed the preliminary title report? Are there potential easements? Are there boundary disputes? Have you spoken to a title company to make sure the title is insurable? For your offer to be taken seriously, it needs to be written in a way that will make it easy for a seller to review. Would it be more trouble than it’s worth?”
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Creative solutions
An estimated 42% of sellers don’t even realize they’re supposed to pay both agents’ commissions, but those who objected filed the lawsuit against the NAR to free them from that obligation. The buyer’s agent commission is now the buyer’s responsibility, and some buyers won’t be able to afford an agent, no matter how badly they need one.
Some agents say there are creative workarounds to solve that problem and undercut the perceived victory of the NAR settlement. The settlement may free sellers from paying the buyer’s agent, but savvy agents will make their payment part of the overall contract.
“If the buyer falls in love with a home offering, I would negotiate a decrease in the price to cover that fee,” Hagley says. “I would make paying the buyer’s agent commission part of the purchase offer.”
Instead of revolutionizing commission payments, the NAR settlement could kickstart technical changes that shuffle commission from one side of the ledger to the other, leaving the big picture mostly intact.
“I feel that the cost to sell a home will remain flat or increase,” Hagley says. “If consumers demand that buyers pay their own commission to their agents, the buyer will find a way to recoup these dollars. That will most likely come off the sale price.”
The rule that will affect buyer’s agents the most forbids sellers from listing a buyer’s agent compensation in their listing. That means sellers will no longer be required to pay commission for their own agent and the buyer’s.
Traditionally, sellers paid both agents, with each making around 3% on the transaction. Under the new rules, sellers will pay only their own listing agent, while buyers will be responsible for compensating their agent — on top of other home-buying expenses, such as their down payment and closing costs.
Industry experts have speculated that to save money, buyers may choose to buy homes without using an agent at all. Instead, they may use online real estate platforms, such as Zillow or Redfin, to find properties and then negotiate directly with the seller’s agent.
However, veteran buyer’s agents say home buyers can’t afford to forgo an agent. Trying to navigate a competitive market and a complicated buying process leaves buyers vulnerable to missteps, exploitation, and remorse.
—————
Added value
To navigate the home-buying process alone would require a crash course in everything from negotiation to title insurance. Buyers in a post-settlement market are likely uncomfortable with processes they may experience just once every 10 to 20 years.
“If we were buying and selling a home every single year, it’d be [different],” says Seattle-based real estate agent Jeff Dickinson. “People are staying put. The average person is moving every 15 or 20 years versus every five years. We just don’t do this often enough to really know how to do it as a consumer.”
Although there are no rules preventing buyers from negotiating commission with listing agents directly, it almost never happens, Dickinson points out, which suggests the average buyer simply isn’t up to the task.
“I’m doing 65 listings a year, and it has been probably four years since I had a buyer directly come to me and say, ‘I want to bypass an agent. I would like to have the [buyer’s agent commission] so I can apply it toward my closing costs,’” Dickinson explains. “I just never get these calls, and I’m very easy to find.”
For novice buyers, the home-buying process can be complex and emotionally overwhelming. Dickinson suggests leaning on buyer’s agents for crucial help on both fronts.
“Buyers, no matter how seasoned they are, always seem to need a human agent to assist them with the process, [if only as] part psychologist,” he says.
Buyer’s agents can offer apprehensive buyers more concrete expertise beyond hand-holding. There’s always more to a property than meets the eye, and buyers without an agent may not know what questions to ask, shares Mary Alice Beevore, an agent based in Minnesota.
“Finding a property is relatively simple with all of the online real estate aggregator sites. The real challenge begins when you decide to start the process of purchasing real estate,” Beevore says. “A knowledgeable broker will not only help arrange for physical inspections, they will also assist their clients in checking on non-physical aspects of the property.”
Beevore elaborates, “Has a permit been pulled for the vacant land next door? Is the property in a zone known for pollution? Are the school district boundaries going to change? Does that shared driveway have a maintenance agreement? The list goes on and on.”
Basic homebuying elements, like offer submission, are often more complicated than texting a number to the seller, says Bay Area real estate agent Cindi Hagley.
“I have never had an offer made without a buyer’s agent involved,” she says. “I wonder how seriously a seller would consider it. If you write your own offer, you need to be aware of all the elements.
“Have you requested and reviewed all disclosures and natural hazard reports? Have you reviewed the preliminary title report? Are there potential easements? Are there boundary disputes? Have you spoken to a title company to make sure the title is insurable? For your offer to be taken seriously, it needs to be written in a way that will make it easy for a seller to review. Would it be more trouble than it’s worth?”
—————
Creative solutions
An estimated 42% of sellers don’t even realize they’re supposed to pay both agents’ commissions, but those who objected filed the lawsuit against the NAR to free them from that obligation. The buyer’s agent commission is now the buyer’s responsibility, and some buyers won’t be able to afford an agent, no matter how badly they need one.
Some agents say there are creative workarounds to solve that problem and undercut the perceived victory of the NAR settlement. The settlement may free sellers from paying the buyer’s agent, but savvy agents will make their payment part of the overall contract.
“If the buyer falls in love with a home offering, I would negotiate a decrease in the price to cover that fee,” Hagley says. “I would make paying the buyer’s agent commission part of the purchase offer.”
Instead of revolutionizing commission payments, the NAR settlement could kickstart technical changes that shuffle commission from one side of the ledger to the other, leaving the big picture mostly intact.
“I feel that the cost to sell a home will remain flat or increase,” Hagley says. “If consumers demand that buyers pay their own commission to their agents, the buyer will find a way to recoup these dollars. That will most likely come off the sale price.”
