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Wild West Era of Real Estate

There’s a lot of buzz in the real estate industry this week. On Friday, March 15th the National Association of Realtors (NAR), the largest trade group in the real estate industry, announced a $418M agreement that would end most litigation of claims brought on behalf of home sellers related to broker commissions. Compass was not included in this settlement, but has reached their own settlement agreement. Compass CEO, Robert Reffkin stated they chose to settle to minimize distractions and focus on serving our clients but does not admit any wrongdoing. The amount of support that Compass has provided our agents to help navigate this has been incredible. We are grateful to work at a company that has continued to provide top notch communication, tools and training. Amidst this, our team feels strongly that our clients are even more empowered than ever. 


This is a particularly nuanced situation - if you are not in the real estate industry and just reading the headlines, there’s a lot to the articles that you may not have considered, not working in the industry. We’ve seen many news articles, podcasts and videos that are creating confusion for clients and do not accurately capture the details of the proposed settlements and how the industry actually operates. 


The long and short of it - we aren’t worried. And don’t think you shouldn't be either. Our team has always empowered our clients to understand the contracts they’re signing, our commission rates and as a seller’s agent what we are deciding to offer to the buyer’s agents. The model may be changing, but our level of service and commitment to our clients will not. We are professionals, experienced in this industry and can navigate these waters to make sure our clients are not negatively impacted, keeping the process simple and productive. 


There are no changes expected before July 2024, but there are two big changes that will come from the settlement: 

  • Buyer Representation Agreements
    • All home buyers will now need to enter into a Buyer Representation Agreement with their agent. Just like sellers sign a listing agreement with an agent to sell their home, now buyers will do the same when they want to buy a home. Our team has already implemented the use of these and see them as a way to be even more transparent (on paper) with our clients. 
  • Compensation to Buyer’s Agents
    • Offers of compensation would no longer be displayed in MLSs. The claim by the parties suing NAR was that sellers felt obligated to pay a commission to the buyer’s agent, a party who did not work for the seller. The settlement essentially says that in the MLS (Multiple Listing Service) listing can no longer advertise a commission to the buyer’s agent. However, a commission can still be offered and advertised through any other means to include any other website other than the MLS (such as the broker’s website), email, phone call, advertising, and so on. Seller’s can still offer a commission to the buyer’s agent who sells the home, the sellers simply cannot put this amount in the MLS. But they can state the compensation essentially anywhere else. 


Commission rates have always been negotiable. Buyer’s agents will still be paid a commission, but it will just be done differently. There is a reason real estate agents exist today - the process is complicated for someone who doesn’t do this day in and day out. Now, the commission rate will be one more thing we negotiate in addition to the sales price. 


New York Times claims home prices will drop, but we don’t believe this will be the case. Buyers still want to buy homes and when you have multiple offers on every home as we do today, the prices will not drop. We do not have enough supply to meet buyer demand. It is more likely that buyers will increase their purchase price and ask for a seller credit to compensate their buyer’s agent. If anything, home prices might actually increase further. Furthermore, it could complicate things for many buyers - for example, a first time buyer who have less cash to put down on a home purchase. It could result in them not using a buyer’s agent, working directly with the seller’s agent who is not operating in their fiduciary best interest and them overpaying, or if they do use an agent having to increase their mortgage to finance the cost of an agent. Home prices won’t go down for buyers - but seller’s could end up selling for more.


In short, it’s all going to be OK. We are committed to serving our clients and there will always be a need for our help navigating huge financial decisions and transactions. Commission transparency has increased, but at the cost of complicating transactions more. More “part time” or less experienced agents may wash out, and that’s probably best for the consumer. We don’t feel that pricing will be significantly adjusted. Our industry is ever changing and we’ve been through many ups, downs and hurdles. If it wasn’t a bumpy ride, what fun would it be after all? 

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