The National Association of Realtors’ proposed antitrust settlement will end buyer’s broker commissions reported through local multiple listing services in the coming months.
This seismic shift in business is like the 100-year flood.
How will buyers agents be paid? Nobody works for free.
In case you missed the big news, the national trade group was hit with a class-action verdict that it was price-fixing commissions. Instead of paying a $1.8 billion judgment, NAR settled for $418 million and said it would prohibit sellers from offering compensation to buyers’ agents through a real estate listings database affiliated with a real estate agent.
Also see: House hunters fear real estate agent rules could make buying a home more difficult
This creates a conundrum for the buyer. Below are some avenues likely to evolve.
Buyer’s agents will call the listing agent in advance to find out if a buyer’s side commission is offered. Agents may require buyers to sign an exclusive buyer broker agreement.
The available inventory of homes for sale is as tight as a drum and has been since the pandemic. Finding a home to buy and having professional representation are important.
For sellers: Have you sold a house recently? Here’s what you’ll get from the $418 million settlement with the realtor
But signing an exclusive agreement between buyers, which involves locking into a single agent, may or may not be something a buyer will want to do. Buyers might commit if it’s a particularly sharp agent. Otherwise, why lock yourself away? say the many buyers I spoke with.
Wealthy buyers can simply pay their agents directly. Less wealthy buyers will have difficulty paying the down payment, closing costs, inspection fees, and paying the buyer’s agent, say, 1% of the sale price or a predefined amount like 4,000 $.
Other choices that may evolve and become accessible to buyers are certainly a cornucopia.
Online search engines and transaction platforms are expected to evolve. Think Amazon or Costco.
Buyers may arrange and/or accept an a la carte menu of fees or hourly wages from licensees for services such as tours, research, negotiations, etc.
Many buyers may go directly to the listing agent thinking that the listing agent will be more likely to accept an offer in which the agent does not have to worry about the seller paying the agent a buyer. (Regardless of the NAR settlement, some buyers are already doing this given tight inventory.)
Buyers can negotiate their own transactions directly with the seller. For example, a for sale by owner or FSBO. Escrow companies routinely support FSBO transactions. At a minimum, the buyer and seller need something in writing and signed. I’ve seen a lot of agreements that are simply written.
How to find accommodation on your own? One way is to create a flyer explaining your wants and needs, who you are, your family, etc. Make 400 copies and start knocking on doors in the neighborhood you are looking for. It’s a lot of leg work, but you might get a few bites.
Buyers and sellers can always hire their own real estate attorneys to review and prepare documents, which may be much cheaper than paying a percentage of the sale price to an agent.
Some mortgage loan originators or MLOs are also licensed real estate agents/brokers. Underwriting the mortgage and drafting the property offer dual tasks and certainly have the potential to grow.
I would bet that many real estate agents will also get their mortgage originator license as a way to get paid.
Freddie Mac evaluates the news
The 30-year fixed rate averaged 6.82%, 3 basis points higher than last week. The 15-year fixed rate averaged 6.06%, 5 basis points lower than last week.
The Mortgage Bankers Association reported a 0.6% decrease in mortgage applications compared to a week ago.
Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming loan of $766,550, last year’s payment was $273 less than this week’s payment of $5,008.
What I See: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: a 30-year FHA at 5.75%, a 15-year conventional at 5.625%, a 30-year conventional at 6.25%, a 15-year Conventional High Balance at 6% ($766,551 to $1,149,825 in Los Angeles and OC and $766,551 to $1,006,250 in San Diego), a 30-year Conventional High Balance at 6.625% and a 30-year jumbo balance set at 6.75%.
Note: The 30-year FHA compliant loan is limited to loans of $644,000 in the Inland Empire and $766,550 in Los Angeles, San Diego and Orange counties.
Eye-catching loan program of the week: A 30-year jumbo at 6.375% with two points.
Jeff Lazerson, president of Mortgage Grader, can be reached at 949-322-8640 or jlazerson@mortgagegrader.com.
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