CNN
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The seismic settlement announced by the National Association of Realtors earlier this month has not yet been approved, but it is already sending shockwaves through the real estate industry.
The mere prospect of a future regulation has already caused some Americans to change their behavior when buying and selling their homes. Some potential buyers said they plan to restart their home search after the new rules take effect, hoping to see a drop in house prices, while some home sellers are not waiting for the new rules to come into force in July to reduce, or even eliminate, the commission they offer buyers. agents.
Housing experts say the $418 million settlement will effectively demolish the current real estate business model, in which home sellers pay both their agents and their buyers’ agents, which critics say inflates home prices. real estate.
If approved by a judge, the settlement comes with new rules for real estate agents.
“It’s uncharted territory,” Debra Dobbs, a real estate agent in Chicago, said of the potential new rules.
The new rules could help lower property prices, experts say.
That’s what Jeremy Cannon, a 34-year-old teacher in Corona, California, hopes.
Last year, Cannon and his wife attempted to buy their first home, bidding on several properties.
“All of our offers were turned down because other people were bidding higher than us,” Cannon said. “We were already trying to get deals above the asking price for almost every location. »
At the time, Cannon decided to put his dream of owning a home on hold. But, for Cannon, the new rules established by the NAR regulation could potentially eliminate what seemed to him to be an insurmountable obstacle: the high cost of housing.
Selling commissions, traditionally split between the buyer’s agent and the agent putting a home on the market, are typically between 5% and 6% of a home’s sale price. The median price of a home in the United States is $417,000, according to census data, meaning the average seller could pay more than $25,000 in brokerage fees.
Seller groups filed lawsuits against the NAR over this practice, alleging it was a violation of antitrust laws.
Under the proposed settlement terms, selling agents will no longer be required to offer to share their commission with buyer agents, thereby decoupling commissions from house prices and opening the door to a more competitive real estate market.
Many experts believe that commission costs have been baked into the prices of real estate listings. Lower commissions could mean lower housing prices.
“I think it could be helpful,” Cannon said. “I hope it could be cheaper and bring down house prices further.”
He now plans to resume his housing search this summer.
Lower prices would be a much-needed reprieve for Cannon and others looking to buy a home: The median sales price of a new home has jumped 21% since January 2020, according to census data.
The new rules also require agents to enter into written agreements with their buyers. Many agents plan to stipulate that if a home seller does not agree to pay their commission, their buyer will have to pay that money.
But Cannon said if buying a home became more affordable, he would be willing to pay out of pocket for an agent, as long as it was “someone who has my best interests in mind.”
Matt Hanley, a 49-year-old who works in the insurance industry in Minnesota, has lived in his home since 2007. He rediscovered how real estate transactions work when he recently purchased a new home.
“We were confused,” he said. “I’m like, ‘wow, I’m surprised the seller has to pay my agent’s commission.’ It seemed like a conflict of interest.
Hanley now plans to list her home in April. However, after the NAR settlement was announced, he changed course: instead of offering to pay a commission that would be split between his agent and his future buyers’ agent, he asked his agent to write “0 % – negotiable” as buyers amount. agent’s commission on the listing page of his house.
“Why wait for the settlement? It’s common knowledge now,” Hanley said. “I’m going to try to be at the beginning of that bell curve.”
Hanley’s experiment may be premature, however. The new rules will prohibit including agent compensation on centralized listing portals, which some critics say has led to agents offering more expensive properties to clients. But, for now, buyers’ agents will still be able to see that Hanley isn’t offering them compensation, which could dissuade them from showing clients his house.
But Hanley pointed to his favorable market conditions as why he thinks buyers can still consider buying his home, even if they have to pay their real estate agent out of pocket.
“We have everything going for us. We don’t have any inventory in our area and we sell out at peak times, so we said, ‘Let’s try,'” he said. “If someone really wants it, they’ll have to pay their buyer’s fees.”
“They should report to their agents, we should report to ours,” he added.
Mariya Letdin, an associate professor of business at Florida State University, said the agreement helped raise awareness that people have the right to negotiate. Nevertheless, Letdin said it was possible that the status quo could be maintained.
“It’s up to consumers, both on the seller side and the buyer side, to make this use more widespread,” she said. “I think it will take more than just a decision. I think consumers will have to defend themselves and not be passive.
“They now have a legally protected voice and they should use it if we want to see change happen,” Letdin said.
News Source : amp.cnn.com
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