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Notes from Anita: Market Update

Notes from Anita: Market Update

Hello, friends! Times are changing in the real estate business. The Department of Justice investigation and the settlement of a class action lawsuit against the National Association of Realtors (NAR) and many large real estate brokerage firms have resulted in changes coming for Sellers, Buyers and Real Estate Agents in how they sell and purchase homes. The class action lawsuit alleges that requiring a Seller to offer a commission to a Buyer’s Broker through the Multiple Listing Service (MLS) utilized by NAR realtor members unlawfully restricts competition and inflates commission fees. The settlement will require all multiple listing services in the country to remove from their online entries any offer of compensation from the Seller to a Buyer’s agent. Further, Buyers who work with an agent will be required to enter into a written agreement defining the fee they will pay their agent before they are shown a home. This required Buyer Broker Agreement shifts the responsibility held previously from the Seller to the Buyer to pay their Buyer agent. As with any cost of closing, there are often concessions negotiated, and a Buyer's agent fee is no different. When Buyers' agents look through the MLS, they will not know whether the Seller is offering to pay Buyer's agent fees, and thus every Buyer’s agent will need to communicate with the Seller’s agent directly to determine whether the Seller plans to offer to pay cooperative agent fees to complete a sale. It is possible a new field will be added to the MLS to communicate Seller's intent to offer the Buyer some closing cost concessions. The bottom line remains it is neither obligated nor assumed a Seller will pay any Buyer closing costs, and this pending settlement spells out Buyer's agent fees are the direct responsibility of the Buyer utilizing any broker or real estate agent. 

I have been in the real estate business for over 40 years and there have always been many different business models available to both Sellers and Buyers. For Sellers, there are companies that charge a flat fee to put a home in the MLS, while the homeowner handles all aspects of the marketing and sale. There are also discount brokerage firms that will put a home in the MLS and on a lockbox and not personally show it. This, of course, differs from a full-service brokerage like Tauber Real Estate Services, where an agent personally shows a home to every potential client and handles all the marketing and promotion without any cost to the Seller until the home is sold. For Buyers, there are brokerage companies that agree to share part of a commission with the Buyer at settlement, as well as brokers who vary their fees, either set fee or percentage based, depending on what assistance the Buyer needs. All commissions have always been negotiable and never locked in stone by law or any representative industry organizations -- I have been a part of thousands of sales over four decades representing a variety of transactions, charging a range of fees depending on the services required. 

As for the future, some experts believe the current real estate system has generally worked well for both Buyers and Sellers and that Sellers will continue to offer compensation to the Buyer’s agent. Other experts believe you will see more Buyers go directly to the Seller’s agent because they don’t want to pay a fee to a Buyer’s agent. A Buyer having no representation can be a major mistake. The listing agent works for the Seller and has no obligation to advise a potential Buyer as to the correct market value of a home, which inspectors, from pool, roof, mold and other experts, should be evaluating the home, and whether there should be any contingencies in the contract, such as closing open permits or attorney reviews of title. Someone needs to be looking through the lens of what is in the best interest in the negotiating process for the Buyer. I believe Sellers offering compensation to a Buyer’s agent will still be the most efficient way for Sellers to reach the greatest number of potential Buyers and will shorten the selling period. All that said, if the home the Buyers want has a Seller who plans to not be involved in compensating the Buyer's agent, the Buyer is now obligated in the Buyer Broker Agreement to pay that fee. This is a total change for most Buyers and could be very scary, particularly for first time home buyers. 

The judge in the case must still approve the class action settlement for the required changes to be set in place. With a preliminary approval released, implementation goes into effect in August, ahead of formal approval expected in November. It should be an interesting time for Sellers, Buyers and real estate agents as we navigate these changes. As always, we are here for your questions and conversation about real estate trends, your personal home estimate, the sales process, or anything you wish to discuss! While there is an unknown right now, industries fluctuate and change regularly and we grow and adapt toward these changes all the time. All of us here at Tauber Real Estate Services are here in partnership in all your homeownership needs and always love hearing from you!


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