Interest Rates
Today the feds decided to keep interest rates at an all-time high. They will re-visit the situation in May.
National Association of Realtors (NAR) Settlement
You may have heard about a settlement (which still has to be court approved) regarding NAR and sellers. It has to do with the Multiple Listing Service (MLS) and how agents, when viewing listings, can see how much commission (if any), the listing agent is offering a buyer’s agent. (The usual commission is 5-6% and is split between the listing office and the buyer’s agent’s office).
This started in the 1990’s because prior to that, buyers were on their own. It was “buyer beware.” Sellers negotiated a fee, that they would pay a listing agent, to market and guide them through the selling process. But the buyer had to represent themselves, or pay an agent to represent them plus, the cost of the real estate they were attempting to purchase. Buyers couldn’t afford it! So it became usual for the seller to ask a bit more for their property, pay the listing agent commission and offer the buyer’s agent commission as an incentive to get buyers to view their properties. Although this became common place, commissions have always been negotiable.
Fast forward to the lawsuit: Sellers claimed that because the MLS reports how much of a commission is offered to the buyer’s agent, this sets up a steering situation. Where an agent might avoid showing certain homes if there was little or no commission offered to the buyer’s agent.
In Oregon, we have clear contracts that spell out where the commissions are going and for how much. They were written by real estate attorneys. Apparently, that is not the case in other states. There have been several copycat lawsuits and many of the larger real estate companies have settled because it was less expensive to settle than fight the charges. Part of the NAR settlement is that this will be final and there will be no more lawsuits brought against its members.
Media misconceptions about this settlement are:
· This ruling will lower the cost of real estate. Property is a commodity. When there is too much inventory, the price is low. When the inventory is low, the price is up. It would take a building boom, the kind that hasn’t been seen since post WWII, to lower the cost of housing!
· Real estate agents will make half as much money. As independent contractors, agents are free to negotiate their compensation, limited only by the contracts that they have with the real estate office they represent. Some buyers believe that if they approach the listing agent regarding a listed property, they’ll get a better price than if they work with a buyer’s agent. Mostly because they think the agent will double side and do both jobs for one commission. There is liability in representing others and it multiplies when an agent double sides! Most agents are unwilling to take on that kind of liability and their principal brokers may not allow it! Should this settlement be approved, double siding would be an even bigger risk than it already is. The only difference for real estate agents will be paperwork. If court approved, this settlement will make what has been an optional contract with the buyer, mandatory.
· The settlement will save sellers nationwide billions of dollars. The claim is that sellers will pocket more money at closing by not paying the optional, buyer’s agent commission. Sellers must first get to closing! Currently, buyers are few and far between due to high interest rates. With this settlement, buyers may need to pay a buyer’s agent commission, if the seller isn’t offering it. That makes selling a home more difficult and the buying pool smaller! Unfortunately, this is a huge blow to buyers (taking real estate back 30 years) and it’s being sold as lowering the cost of home ownership.
Please contact me if you have any questions or wish to discuss this settlement or anything related to real estate…or we can just shoot the breeze!