Struggling Home Buyers Will Pay the Price for the Commission Collusion Verdict

Struggling home buyers will feel the impact of the real estate commission ruling. This is likely even before the appeals are heard, we will see buyer agent commissions drop. Additional lawsuits are already lined up, it’s safe to say that change is coming. That change is going to land squarely on the home buyers, and it won’t land equitably.

Professional agents — experienced, productive and engaged agents — work extremely hard to make a transaction look boring. Real estate is not buying a book on Amazon. Every home, lot, area, seller, and buyer is different. The timing, market conditions, motivations, expectations and circumstances of each deal are different. Professional agents contain all of that chaos; keep clients out of trouble, and close deals.

The ruling reinforces and makes clear that home sellers do not have to offer buyer agent compensation for bringing a buyer. Buyers that want representation may now be required to pay for all or part of it. Sellers always had an option for buyer broker compensation, they was never a requirement to pay any. While it’s the norm, given the collusion ruling sellers might not pay for the “opposing agent”, something they might see as a conflict of interest. So given that a few (a lot) of top-of-mind questions and my view as an associate broker in Georgia…

Is a Buyer’s Agent Required?

No. Buyers can go in unrepresented. In that case, the listing agent would likely write the offer. How the buyer is handled would be up to the listing agent. That would then dictate how the rest of the process is handled. The listing agent has a number of options, from no involvement to dual agency (in states that allow it).

How will Buyer Agents be Paid?

Depends on the situation and a buyer brokerage agreement. Some buyers will pay an agreed upon fee at closing. Some highly leveraged buyers may not be able to find the funds for an agent. It’s possible that the commission might be added to closing costs — all unknowns at this point. It is reasonable to see this adversely impact highly leveraged buyers the most.

What Options will Buyers Have?

Find a professional agent and negotiate a fee or see what the open market brings. Just in the few days post-verdict, chatter is out about “boutique” buyer services using an ala carte menu. We’ve also heard chatter about companies assigning agents on a “fee” basis (think appraisal management firms) and of course, those “disruptors” are out there. One that “rebates” their commission to buyers; tough to do if there isn’t something to hand over. Their business model of paying for buyers might need adjustment. Given that these firms lost close to $2B during the white-hot post pandemic market should frame expectations now.

Use an Attorney?

What attorney is going to set up and attend showings? In Georgia, real estate attorneys close deals, they are rarely involved in negotiation or contracts. In the very rare circumstance where this might happen, what would the charge be?

How will Buyers find Associated Players?

The impression that buying a home isn’t that complicated will be tested. Buyer sources will be the internet, social media, and references. Navigating through lenders, mortgage options, inspectors, appraisers, surveyors, and the host of other players is on the buyer. What are expectations for success?

What about New Homes?

Under no circumstances — even before this ruling — should any buyer, anywhere, go into a new home purchase unrepresented. Builders continue to cut quality, use the cheapest labor possible and increase prices. They are exploiting the inventory shortage and while “that’s business” it’s at the buyer’s expense.

What Should a Home Buyer Expect Moving Forward?

Having an agent representative is going to be an added cost. What level of experience, what level of service and what is desired are all variables that will dictate the cost of representation. How quickly all of this hits listings in the field is unknown, but as with most everything, you get what you pay for.

The real estate industry is largely to blame for this situation, the impact will be felt most directly by home buyers. Buying real estate is an insanely complex process, one that even experienced agents need to spend significant time on. Home buyers have no idea what they don’t know; despite the bluster and posturing from “the public”, the internet experts are not to be trusted. The “iBuyers” and those companies “reinventing” real estate spectacularly imploded during a robust market, no doubt those leeches will be looking to hook naïve buyers.

The best advice for home buyers really hasn’t changed — get educated. Understand the process, buy within budget, and use Google to research any real estate agent considered for use. A professional agent will deliver professional results.