The Upcoming Changes in Real Estate from the NAR Settlement
I want to preface this by saying THERE IS STILL A LOT IN MOTION. I’ve already seen the date for these changes from July to August and there is still a lot in the news about appeals, etc., so I expect this information to change a few more times.
As always, there is SO much misinformation being reported out there. This is not the end of real estate commissions, real estate agents, etc.. Here’s what I know about the upcoming changes in real estate so far:
the compensation to the buyer’s agent won’t be posted on the MLS anymore, but it can be posted on other websites. This is probably so that buyers can understand what they may or may not be paying their buyer’s agent for. We are still figuring out how this will play out, but my guess is that this will remain similar to what we see today. Otherwise, this will negatively impact buyers in an already-hard market, especially at the first time home buyer level. We may see lenders allow this to be rolled into the loan amount, but nothing is set in stone yet.
Buyers will have to enter in to a Buyer Broker Agreement with an agent, even to do things like schedule showings, etc. I think this will be beneficial to buyers since they’ll likely be taking a closer look at the agent that they are hiring and understanding agent responsibilities, compensation paid and more. Sometimes, buyers just go with the first agent they meet at an open house and have a negative experience. THIS is one of my favorite outcomes of this ruling, because I think the standard of agents will be raised.
Sellers WILL be able to cover buyer’s agents fees. It may look different though. We still have a lot to figure out and may have some growing pains come August, but we will figure it out as we always do. The career agents are not worried about the new standards heading our way - most of us are excited and already implementing these changes in our business.
Some think this will help with affordability of homes. If we think about this, we are talking about 2.5-3% of the home sales price, which isn’t a lot. Example: this is 25-30k off of the price of a 1 million dollar home. This is a significant amount of money, sure, but we’ve got other issues affecting our housing market right now in San Francisco that are doing more damage to affordability. Interest rates remain high and so the inventory (supply) remains low, while demand is still very high.
The fees that will be paid to buyer’s agents and listing agents will continue to be negotiable. Commission discussions are negotiated between and seller and listing agent before ever hitting the market, often during the initial walkthroughs and listing presentations. Other scenarios that will continue: experienced buyer’s agents may continue to have their buyers pay an additional fee to make sure they get 3% because the buyers feel the value to have that agent on their side is worth it. Sometimes sellers can’t afford a certain percentage, or are repeat clients, so we talk through the different scenarios for those situations, too! So far, when talking with my colleagues, many sellers are still opting to pay that buyer’s agent’s fee.
In San Francisco, our buyers and sellers are super savvy, and it’s common that they WANT to work with the more experienced agents - it’s one of the biggest financial decisions on both the buy and sell sides, and we are in an incredibly complex market here. They want to know that they’re taken care of and they want someone to be able to explain all of the risks associated with buying/selling a home.
One thing we may start seeing is people using technology to help them with their purchases instead. Read more about that here (and good luck! :)
My opinion is that NAR hasn’t really been that helpful in a while. While they were created to put ethics into this (sometimes) sleazy business, they have not been great at upholding the same standards within my industry. I run across sketchy agents now and again, or those who do a bad job because they think this is a part-time gig to make a quick buck, but the majority of agents (in San Francisco, at least) are such a pleasure to work with. They’re smart, experienced professionals who usually have their client’s best interest at heart.
When August rolls around, we may fumble for a bit to find our new routines here, but we’ll get through it, just like we did with the Covid disruptions without open houses, rising interest rates, insurance insanity and more. To quote Heraclitus, “change is the only constant in life”.
