The Proposed NAR Settlement Further Complicates Real Estate Transactions

This proposed settlement is a direct hit on home buyers, it does nothing to raise the agent bar or enhance the consumer experience.

Well for those reading the headlines and expecting “seismic” changes to the home selling and home buying process, this is a reality check. The view from the trenches differs than that from the Ivory Towers. As always, the MSM will frame everything about the proposed agreement in the most bombastic and frenetic ways, blathering about “what this means” to all involved. How many click bait headlines mention that this is a proposed settlement? They will miss the “be careful of what you wish for” boomerang this will have.

Home buyers will bear the brunt of these proposed changes, especially those on the edge of qualifying and/or using FHA/VA/USDA or similar programs. The potential of having to pay for buyer representation will either force them to go it alone or postpone a purchase. Home builders are delighted; already reduced compensation for co-op agents can now be entirely removed. One less set of eyes on that process. For sellers, what’s changed? Commissions have always been negotiable; sellers could collaborate with any agent and pay anything they want.

If a seller was paying 5% to list, what will they pay now? Nothing? What professional agent is working for free? Will they pay only the listing agent? They’ll save 2.5% and expect buyers to cover the cost of their agent? How many buyers can afford professional representation? There’s a nationally known firm that lost hundreds of millions of dollars over the last few years that provides kickbacks to sellers and buyers, they’re doing this and how is that model working? The media would do well to scratch beneath the surface a bit. A real estate transaction isn’t buying a book on Amazon.

Expectations for Home Sellers

· Listing and buyer agent commissions have always been negotiable. Now this will be even more clearly spelled out in the listing agreement. Nothing changes.

· Sellers continue to have options ranging from “by owner” to limited-service brokers to full-service brokers. Nothing changes.

· The expectation that “I don’t have to pay the buyer agent” needs to be carefully examined. Sellers and listing agents need to fully understand the local market and consider the best route.

Expectations for Home Buyers

· First time buyers and those on the edge of qualifying might not be able to afford a buyer’s agent.

· Unrepresented buyers will lack oversight and advice when it comes to data analysis, contract prep and negotiation, transaction management and the hundred other variables that always pop up.

· Buyer brokerage agreements will be required. Establishing “buyer agent compensation” will be a developing discussion; what is professional guidance worth? How is an agent paid? When is an agent paid?

· New home buyers will also be affected. Builders strongly prefer unrepresented buyers and this will further play into their hand. Builders enjoy a significant win here.

The Reality Check

· Dual agency — one agent controlling the transaction — will increase. This is an insidious practice, illegal in several states and total elimination should be part of the settlement.

· Some buyers will not have a dedicated buyer’s agent. Many struggling buyers will enter into one of the largest financial transactions of their lives and have little to no professional guidance.

· As this happens, there will be complaints from these buyers about being “taken advantage of” and the like. As this builds, there will be consumer complaints, examples of buyers “being ripped off” and added vitriol directed toward the home buying process and agents.

· Prices will not drop. Sellers will not any “pass on” any commission savings just as manufacturers have not “passed on” reductions since the end of the pandemic. Any savings will be pocketed by sellers.

· The “hobby agent” population should drop. If 50%-60% of “agents” leave; the industry and the public will benefit.

· There will be an increase of “transaction” or “ala carte” services pitching buyers the idea that they can consult an agent for a specific part of a transaction. These firms are already out there.

· The self-anointed “disruptors” in the industry will beat the drum about “a better way to do it” and the results will be the same as in the past. A real estate transaction is not buying a book online.

· There will be a ripple effect across other industries and the government will of course get involved in ways to “streamline” this process and protect home buyers. Like everything involving the Feds, this won’t end well.

Any professional agent will agree that the industry in its current state is a clown show. This was self-inflicted as a result of NAR and state commissions failing to enact legitimate entry and retention requirements; a goldfish can get and maintain a real estate license. It takes a significant amount of work to make a real estate transaction look boring. The skills of a professional agent rival those of any other profession, the challenge with real estate is public perception. In the end, if these policies are enacted, nothing will substantially change. If you want genuine change, make it much tougher to get and keep a real estate license. Tie “active” status to annual volume; cull the herd regularly, and institute classifications based on volume and experience. That’s a major move; will never happen but that’s the change that would resonate and help everyone.

The Hank Miller Team provides confidence to clients buying and selling homes in the North Atlanta Real Estate Market. Our unmatched sales and appraisal experience, relentless drive and ability to manage transactions allow our clients to make sound, decisive real estate decisions. We offer full time, full service, personal hands on attention and concierge level service every step of the way for perhaps the most important financial decision you’ll make. 678–428–8276 or Info@hmtatlanta.com