April 18, 2024

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The Realtors settlement has already changed the way some Americans buy and sell homes

The Realtors settlement has already changed the way some Americans buy and sell homes



CNN

The seismic settlement announced by the National Association of Realtors earlier this month has not yet been approved, but it has already begun to send shockwaves through the real estate industry.

The mere prospect of a future settlement prompted some Americans to change their behavior when buying and selling their homes. Some potential homebuyers said they plan to resume their housing search after the new rules are implemented in hopes of finding lower home prices, while some home sellers said… They're not waiting for new rules to come into effect in July to reduce — or even eliminate — the commission they offer buyers Client.

Housing experts say $418 million settlement It would effectively demolish the current real estate business model, where home sellers pay both their agent and buyers' agent, which critics say inflates home prices.

If approved by a judge, the settlement would come with new rules for Realtors.

“This is uncharted territory,” Debra Dobbs, a Chicago real estate broker, said of the potential new rules.

Experts say the new rules could help bring down house prices.

That's what Jeremy Cannon, a 34-year-old teacher in Corona, California, hopes.

Last year, Cannon and his wife tried to buy their first home, putting in offers on several properties.

“All of our offers were rejected because other people were bidding higher than us,” Cannon said. “We were actually trying to bid above the asking price for almost every place.”

At that time, Cannon decided so Hit pause About his dream of owning a home. But for Cannon, the new rules established by the NAR settlement could remove what seemed like an insurmountable obstacle to him: the high cost of housing.

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Sales commissions, traditionally shared between a buyers agent and the agent listing a home on the market, typically range between 5% and 6% of the home's sale price. The median home price in the United States is $417,000, according to Census data, which means the average seller could pay more than $25,000 in brokerage fees.

groups Sellers filed lawsuits NAR is against the practice, claiming it constitutes a violation of antitrust laws.

Under the terms of the proposed settlement, sellers' agents would no longer be required to offer to split their commission with buyers' agents, decoupling commissions from home prices and opening the door to a more competitive housing market.

Many experts believe that commission costs have been built into home listing prices. Lower commissions could mean lower home prices.

“I think it might be helpful,” Cannon said. “I hope it will be cheaper and bring house prices down even more.”

He now plans to resume his search for his home this summer.

The drop in prices will be a much-needed reprieve for Cannon and others looking to buy a home: The median sale price of a new home has risen 21% since January 2020, according to Census data.

The new rules also require agents to enter into written agreements with buyers. Many agents plan to stipulate that if the home seller doesn't agree to pay their commission, the buyer will be on the hook for that money.

But Cannon said that if buying a home became affordable, he would be willing to pay out of pocket for an agent, as long as they are “someone who has my best interests in mind.”

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Matt Hanley, a 49-year-old insurance trader in Minnesota, has lived in his home since 2007. He got reacquainted with how real estate transactions work when he recently bought a new home.

“We were confused,” he said. “I say, 'Wow, I'm surprised the seller has to pay my agent's commission.' “It seemed like a conflict of interest.”

Hanley now plans to list his home in April. After the NAR settlement was announced, he changed course: Instead of offering to pay a commission that would be split between his agent and the future buyers' agent, he asked his agent to write “0% – negotiable” as the value to the buyers. The agent's commission on his home listing page.

Why are we waiting for a settlement? “This is public knowledge now,” Hanley said. “I'm going to try to be at the beginning of that bell curve.”

However, Hanley's experiment may be premature. The new rules would prohibit agents' compensation from being listed on centralized listing portals, which some critics say has led agents to push more expensive properties for clients. But for now, buyers' agents will still be able to see that Hanley is not offering them compensation, which may dissuade them from showing his home to clients.

But Hanley pointed to favorable conditions in his market as a reason he believes buyers might consider buying his home, even if they have to pay their realtor out of pocket.

“We have everything going for us. We don't have inventory in our area and we're selling at peak time, so we said, 'Let's try it.'” “If someone really wants it, they'll charge buyers.”

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He added: “They must report to their agents, and we must report to our agents.”

Maria Litden, associate professor of business administration at Florida State University, said this settlement helped raise awareness of people's right to negotiate. However, Leitden said it is possible to maintain the status quo.

“It is up to consumers on both the buyer and seller side to use this widely,” she said. “I think it's going to take more than just judgment. I think it's going to take consumers standing up for themselves and not being passive.”

“They now have a legally protected voice, and they must use it if we want to see change happen,” Letdin said.