The real estate market is ever-changing and always evolving.  That being said, the only constant is change.  In March, the landmark case involving real estate commissions had NAR offer a potential settlement to the Plaintiffs for $418,000,000 and two changes to our business.  These two proposed changes are: (1) agents must sign a buyer agreement before showing houses. The agreement outlines what the roles and responsibilities of each party are and how agents get paid, and (2), all MLSs can no longer display buyer compensation as a field in their displays of listings.

In Virginia, it has been the law for more than a decade to have buyer agreements signed after the first substantiative conversation about real estate. At the time of the proposed settlement, only 18 states required signed buyer agreements. This practice is a good thing in my opinion.

The second proposal has added a lot of misinformation provided by – you guessed it – the media. Headlines are deceiving and often just plain wrong. Real estate commissions are not going away. They may be paid differently depending on how the seller chooses to offer compensation, but real estate agents will be paid because, as we all know, no one works for free.

Another misnomer is that prices were driven up by our fees. Nothing could be further from the truth.  Market conditions drive up prices, not our compensation. When the Fed lowered its rate to zero because of the pandemic, this caused mortgage interest rates to drop to the 2.25-3.5% range for an extended period. This caused a feeding frenzy on any house that came on the market, and prices escalated dramatically.  This had nothing to do with our commission rates. Then, the Fed increased rates drastically because inflation was rising.  That resulted in the mortgage rate lock that we have discussed over the last two years. This lock, in conjunction with more people aging in place, has lowered inventory to historical lows. As we know, low supply and high demand result in higher prices. The market drives prices either up or down, not this settlement and more importantly, Realtor fees. 

Prices will not come down because of the settlement – the market has, and always will, dictate prices.

Commissions are now negotiable. Realtor fees have always been negotiable. With this settlement and the corresponding buyer agreements needed, many people believe that sellers will no longer offer buyer agent compensation.

Sellers pay the listing agent a fee and allow them to offer part of this compensation to a buyer agent.

Many sellers have said they were not aware of this and feel if they understood it, they wouldn’t have allowed their agent to pay someone to negotiate against them. Agents need to do a much better job of explaining paperwork, the process, and what to expect as they progress to settlement. This will result in a more professional and streamlined experience, in most cases. If the seller does not allow compensation to be offered to a buyer agent, the buyer will be responsible for paying their agent. This will be a fundamental switch and many more conversations need to take place between agents and their clients about the pros and cons of offering compensation and the impact to their bottom line. Time will tell if the seller makes concessions, lenders will change to allow buyers to pay when they are a VA, FHA, or USDA buyer, and many other changes…stay tuned.

As always, I am available to speak with you about any of these changes and how they affect you if you are a seller or a buyer. Don’t hesitate to reach out, as I’m never too busy for you!