https://www.cnn.com/2024/03/15/economy/nar-realtor-commissions-settlement/index.html

Real Estate disruption is here?

Down with commissions! We were ahead of the game once again. Honestly, I hope this helps lower acquisition and ownership costs for buyers but I don't think it will. Only time will tell.

That is a very misleading title on that linked article. 6% commissions are not gone at all. The commissions for selling your home have always been negotiable.

The only thing that the NAR settlement means is that starting in mid-July 2024, the MLS will not be showing the commission structure for buyers agents on the MLS. Shared compensation for the Listing Agent and the Buying Agent is still able to be done. But, how much that is will now need to be communicated off the MLS and in another way. A simple text or call to the Listing Agent to ask what the Buyer Agent compensation is an easy enough task.

Seen a lot of "no big deal" commentary from real estate agents and I'm not sure I agree, at least not long term. Sellers have historically agreed to 4-6% commissions with the understanding that the commission would be shared between buyer and seller. I suspect in the short run, seller's agents will try to maintain the existing structure but will get more push back from sellers to negotiate only the seller's agent portion and offer concessions for buyer's agent commissions rather agree to the full 6%. It also forces buyers to have an agreement with the buyer agent so this will also lead to more discussions between buyer and agent as to buyer agent's commission/compensation.

yes there are work arounds - but understand why there was a settlement - it was because the practice is illegal.

so yes - you will be able to find an alternate way to engage in an illegal practice - but the bigger question is should you?


also - the new regulation will require that the buyer and buyers agent enter into an agreement that probably will include compensation,

What is illegal? Negotiating a contract with terms both parties agree to? And that agreement contains commissions to both the buyer and seller agent?

What this settlement does is open the negotiations. The problem was what was seen as price fixing by the MLS. Now it's all negotiable.

We in mortgage have always negotiated. Nothing new to us.

Per the settlement offering cooperative compensation is perfectly acceptable. It just can't be done on the MLS.

Carnwellag2 said:

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yes there are work arounds - but understand why there was a settlement - it was because the practice is illegal.

so yes - you will be able to find an alternate way to engage in an illegal practice - but the bigger question is should you?

also - the new regulation will require that the buyer and buyers agent enter into an agreement that probably will include compensation,

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In the agreement NAR doesn't admit any wrongdoing but agrees to remove the comp from the MLS. To your point, Buyer's agents now have to enter into agreements with clients. They can still do the same arrangements but I think removing the Buyer's agent comp will put pressure on the parties to actually negotiate their own commissions. While the existing agreements aren't considered illegal, I suspect if we don't see any material changes to the structure of the market, you will see another antitrust lawsuit against the largest brokerages in a few years.

Carnwellag2 said:

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yes there are work arounds - but understand why there was a settlement - it was because the practice is illegal.

so yes - you will be able to find an alternate way to engage in an illegal practice - but the bigger question is should you?


also - the new regulation will require that the buyer and buyers agent enter into an agreement that probably will include compensation,

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Your statement is wrong. There is nothing illegal going on. Commissions have always been negotiable. And there is nothing wrong with Realtors demanding the traditional 6% for listings and sharing that with Buyers Agents. As a seller, you WANT buyers agents to know their compensation and you WANT them to bring their clients to see your home because you will know that the buyers agent is bringing a qualified buyer that can complete the transaction. There is nothing illegal with a seller telling the world what they are willing to pay a buyers agent.

Also. Buyer's Representation Agreements already exist and most brokers already require their agents use them…and they already include compensation. Those agreements are great! One of the benefits can actually help protect the Buyers agent from a buyer just using the agent as a door opener to homes and then ending up using a different agent to close a deal. Buyers Agreements are beneficial for the agent and the buyer.

As I said before, this settlement by NAR doesn't really change anything that isnt already in place. It is just that now, the commission structure wont be found on an MLS website. The settlement clearly states that those shared commissions can still be marketed outside of the MLS website.

When I sell my OWN house, I still offer 3% to a buyers agent. And if I can't use the MLS to let buyers agents know that, I will certainly use other means of advertising that fact.

Also. As a listing agent or a buyers agent, I can easily break down the cost of my services for each task I complete during the transaction process. I can show line by line the true cost of all the work done on the behalf of the client. In most cases those individual charges would add up to a lot more than the 3% commission earned. So, if a seller or a buyer wants to negotiate to pay less, they will get less services and less tasks done by their agent. But, that just means the client will have to do that work on their own. You get what you pay for…

Quote:

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Also. As a listing agent or a buyers agent, I can easily break down the cost of my services for each task I complete during the transaction process. I can show line by line the true cost of all the work done on the behalf of the client. In most cases those individual charges would add up to a lot more than the 3% commission earned. So, if a seller or a buyer wants to negotiate to pay less, they will get less services and less tasks done by their agent. But, that just means the client will have to do that work on their own. You get what you pay for…

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For sake of discussion, I'm curious about the comment above. I'm not arguing for/against the 6% structure, but seeking to understand what you said.

If cost of services is more than the 3% commission, why would people be realtors? I get there's a volume component, but if each deal is at or near par that's a lot of deals needed to make a living.

Also, do the services provided materially change depending upon property price? A 300k property then "costs" 9k in services and a 500k property costs 15k. Does it really cost 6k more to sell/buy a property that's 200k more?

ktownag08 said:

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Quote:

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Also. As a listing agent or a buyers agent, I can easily break down the cost of my services for each task I complete during the transaction process. I can show line by line the true cost of all the work done on the behalf of the client. In most cases those individual charges would add up to a lot more than the 3% commission earned. So, if a seller or a buyer wants to negotiate to pay less, they will get less services and less tasks done by their agent. But, that just means the client will have to do that work on their own. You get what you pay for…

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For sake of discussion, I'm curious about the comment above. I'm not arguing for/against the 6% structure, but seeking to understand what you said.

If cost of services is more than the 3% commission, why would people be realtors? I get there's a volume component, but if each deal is at or near par that's a lot of deals needed to make a living.

Also, do the services provided materially change depending upon property price? A 300k property then "costs" 9k in services and a 500k property costs 15k. Does it really cost 6k more to sell/buy a property that's 200k more?

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You misunderstand. I am talking about the cost of services for the seller or buyer (what agents would charge if the services were broken down a la carte) Not, the cost to the agent. You pay a guy that comes out to your home to fix your washing machine a visit/service charge of $50-$100. Just to come out. What would it look like if you had to pay a Realtor for their time per hour? It might cost you $100 to $200 just to go tour a house.

The higher the price of a home/property, the smaller the pool of buyers that can afford it. Generally, more time to sell, more money spent on marketing, open houses and advertisements. When you get into higher priced territory, the seller is going to want to use a more experienced agent that has handled property in the very high values. The cost of that agents time per hour is going to be more. If you have a million dollar property, you are not going to use a rookie agent to list. Don't you think the hourly charge for a 20 year realty veteran is going to be higher than a 1 year novice?

You are not going to open up that property to be toured by every Joe off the street. Usually this involves more pre-screening of potential buyers. The money being put in as down payment is much higher and fees for everything regarding closing costs, inspections, surveys and lender fees due to the property usually being larger or bigger and the mortgage being larger. Also, the higher the price of the property, the more "pristine" the condition of the property will need to be. Buyers of higher priced homes expect it to look and present like a higher priced home. The costs and risks for litigation for higher priced homes if things go wrong is higher. Buyers and Sellers have more cash to potentially lose if the deal falls apart because there is more earnest money involved.

Your Realtor needs to be an expert at all facets of the property to make sure it's ready to go into the market. Your higher priced home is competing against other similar properties and a good agent is going to be worth their weight in gold to bring out the points of differentiation. Have you ever considered something simple like the difference in an inspection report for a million dollar property vs one that is $250K? The time it takes to review inspection reports and negotiate repairs can be vastly different depending on the property. Does your agent know what the heck they are doing when evaluating an inspection report when it comes to what needs to be fixed and what really doesn't? Do they have contacts in the various industries that can be brought in to further evaluate the HVAC, Electrical, Roof, plumbing and foundation systems? Can they get all of this done within the option period? And this is just one example.

Again. You get what you pay for.

SteveBott said:

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What is illegal? Negotiating a contract with terms both parties agree to? And that agreement contains commissions to both the buyer and seller agent?

What this settlement does is open the negotiations. The problem was what was seen as price fixing by the MLS. Now it's all negotiable.

We in mortgage have always negotiated. Nothing new to us.

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It's illegal to conspire to keep prices higher for sake of commissions. Heard of antitrust?

It always irked me when realtors would say "why wouldn't you use a buyers agent? It's free to you." Right.

And not to be completely anti-realtor because there's a time and place for them and I've had some good ones. Who have genuinely helped and saved me money. The others were just there collecting what they could.

themissinglink said:

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Carnwellag2 said:

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yes there are work arounds - but understand why there was a settlement - it was because the practice is illegal.

so yes - you will be able to find an alternate way to engage in an illegal practice - but the bigger question is should you?

also - the new regulation will require that the buyer and buyers agent enter into an agreement that probably will include compensation,

---

In the agreement NAR doesn't admit any wrongdoing but agrees to remove the comp from the MLS. To your point, Buyer's agents now have to enter into agreements with clients. They can still do the same arrangements but I think removing the Buyer's agent comp will put pressure on the parties to actually negotiate their own commissions. While the existing agreements aren't considered illegal, I suspect if we don't see any material changes to the structure of the market, you will see another antitrust lawsuit against the largest brokerages in a few years.

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correct - that is why they settled. However, if the practice doesn't change materially, then there will be more lawsuits. What we saw for years were buyer's agents not representing their clients with the their clients best interest in mind. (i.e. not showing properties that weren't financially beneficial to the buyers agent; no real incentive to negotiate a lower price).

we will eventually get to the agents being compensated by their own clients. looks like it will be baby steps

I've heard that a thousand times and always false. Realtors used every trick on the book to protect 6%. You name the excuse and I've heard it. Here is a few:

1 buyer that 3% is paid by the seller. False.
2 my head broker won't let me negotiate. Probably true but find a new realtor
3 listing agent to seller…if you don't offer 3% no agent will bring a buyer. True because of illegal steering
4 buyer agent-my commission is free. False
5 our fees are fixed. False

I could go on. Now all the realtors are coming into my world

SteveBott said:

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I've heard that a thousand times and always false. Realtors used every trick on the book to protect 6%. You name the excuse and I've heard it. Here is a few:

1 buyer that 3% is paid by the seller. False.
2 my head broker won't let me negotiate. Probably true but find a new realtor
3 listing agent to seller…if you don't offer 3% no agent will bring a buyer. True because of illegal steering
4 buyer agent-my commission is free. False
5 our fees are fixed. False

I could go on. Now all the realtors are coming into my world

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Disagree with #3. Agents representing buyers must present an offer unless it does not meet a seller's stipulation. Not every realtor is as unethical as you present. What is your empirical data that validates illegal steering? Actually, several other of your points are also not accurate.

I don't mind saying this at all. The 6% realtor commission is the biggest fleecing of America in our history outside deficit spending.

I think this change will move to put pressure on RE agents to negotiate % commission.

Americans have accepted that 3% buyer and seller commissions were standard but there will be some pressure to advertise lower %s.

I think overall RE agents make a fair living. They are like doctors in a sense where good payers covers for bad payers (medicare/medicaid, unisured). Taking care of bad payers are money losers but balanced by good payers. If doctors all had good payers, many would be making 3x what they do now which is too high IMO.

Just like doctors, some RE clients require tens/hundreds of showings without ever buying. They are balanced out by clients who know what they want just looking at the MLS listings.

I am the latter and just seems unfair to me to pay for the "bad" payers.

I just bought close to a 1M property. I found it on MLS, asked my RE agent for one showing, put in an offer the next day, closed in 40 days. I called up the inspector, met him there, and got the report. I used the same mortgage broker for my past 10 closings. I signed all the docusign paperwork and provided all information quickly to both sides. I went to closing and completed it in 15 minutes without needing the agent at closing. To be fair, I bet my RE didn't spend more than 10 hours on me. I am just about as low maintenance and the dream client. Getting 3% or close to 30K for maybe 10 hours of work seems high. I get that he has other clients who he probably spent 10x the amount of time without every buying anything.

My CPA charges me 6k to file all of my taxes b/c its complicated. It would be silly for him to charge 6k to someone who has only a W2 job that turbotax could do in 30 minutes. This is the issue buyers have. An experienced investment buyer should not pay the same as a new home buyer requiring 10+ showings and handholding throughout the process.

Maybe RE agents can move to a more fee for service model. A showing is $100. Putting in an offer is $200. At closing, 1%. So even if a buyer never purchases something, they are still paying the RE agent for their showing time.

I've been involved in a lot of RE transactions and seen other than 6% before. If consumers didn't look out for themselves that's on them.

Go get a license and see how that works. In my opinion the biggest problem is the low barrier to entry. The really good ones are worth a lot. Problem is identifying that really good one.

Question for agents - of the 3% typical fee, how much goes in your pocket vs brokerage firm?

What's goes on behind the scenes?

I did not go through the typical 3% broker. I haven't done this for years because I was burned by this years ago,.

I had a friend who was a RE broker and did all of my transactions for 1% on the buy or sell side. I was always low maintenance and never requested a showing unless I was almost sure to put down an offer just by looking at MLS. He sadly retired, a really smart/good RE broker.

I found a RE broker via a referral. I found a 1M property on MLS, got a showing from her, put down an offer/closed in 30 days. This was the 1st showing she did for me. By then, I was an experienced buyer and she added very little other than writing up the contract. Closed, she got paid $30K by the seller. Ok, alittle irked I didn't negotiate a lower % before the showing but it was my mistake and I didn't want to ask for a % cut after the fact.

Soon after, I found a 350K property, again this was the 2nd showing she every did for me. Put in an offer. Again, I didn't ask for a rate cut b/c it was only a 350K property and I am a fair guy who understands everyone needs to make a living. Seller and I were off by 5K and he & I did not budge. Seller agent offered to cover half the gap out of his commission. My agent did NOT offer to cover the other half of the gap which she would have made 7500 in a simple transaction. I did not ask because the principal was more important than the property. She made 30K for little work and didn't have the business sense to cover half the gap to make another 7500.

I soon cut bait with her and swore to never pay 3% on the buy side again. She prob lost commission on about $5M since I cut bait. I got referrals for a few more since and neither would budge off the 3%.

To those in RE and business in general, look out for your low maintenance and best clients. It is better to make them feel appreciated than treat them like any other client. I treat everyone in business with fairness even if I pay more than I need.

Thanks for sharing your story. It's an industry that has few professionals. Not all realtors are created equally. I suspect this change will increase the gap between the pros and the rest of the field.

I had to go to the ER a few years ago for stitches. A couple of nurses and a PA stitched me up in a hour or so. An MD walked by, never even slowed down and said what happened to you. I got a bill from her for a $4,000 consultation. It's not just Realtors.

How do we feel about auto repair? The book says something is a 3.2 hour repair, it gets done in 30 minutes but you get billed 3.2 hours labor