The NAR settlement of the Sitzer-Burnett case has created some furor, and the media is exploding with speculation about the industry’s changes. This speculation is fueled mainly by people who aren’t in the industry, who rely upon or regurgitate articles someone else not in the industry wrote or just speculation shaped by that individual’s narrow view of the overall questions. There are no benefits to the changes brought by the litigation for sellers or buyers, but that doesn’t matter to the attorneys who earned an 8-figure payday by bringing this litigation. (I know that sounds snarky, but I couldn’t resist)
So, let’s dive into today’s realities.
First, cooperative compensation has not gone away; only the ability to publish an offer of compensation in the MLS is prohibited. That means that prudent sellers will still be able to cover the cost of the buyer’s agent with the transaction instead of limiting the pool of buyers who might be able to afford their house.
Anyone who has ever worked with or been a first-time home buyer knows they are usually extremely short of cash and are apprehensive about the home-buying process. They need, and, more importantly, want professional assistance and guidance through home-buying, from finding and choosing a home to negotiation, contract preparation, transaction management, and closing advice. At the same time, everything they can save is used for closing expenses and down payment. According to an independent study completed in 2022 by AB Schnare Associates, adding the cost of professional representation as a cash expense could increase the cash needed to buy the home by 12 to 42% or more! It makes it impractical for most buyers to consider a home where the transaction does not cover their agent’s fee. How will they get what they need without finding a house where the cost of their representation is covered in the transaction?
Second, commissions haven’t magically become negotiable. They’ve always been negotiable, and the real estate industry has numerous business models that offer alternative services to consumers. In over 50 years of practicing as a real estate professional, I would say that the commission topic seems to come up almost every time a consumer hires an agent to buy or sell a property. Each time that happens, there is an explanation of services, expectations, and an agreement by both parties before the contract is executed.
Third, real estate values aren’t impacted by who pays an agent’s fee or whether it is published in the MLS. Values fluctuate with the market’s supply and demand. In 2008, there was an oversupply of property and a limited number of buyers to buy it, so prices went down. In today’s market, where there is a limited property supply and many people want to be buyers, prices continue to increase. In neither instance was the agent’s commission a factor impacting value.
Fourth, don’t panic. Realtors are professionals. We are committed to our clients’ needs, helping people achieve the American Dream of homeownership and building familial and generational wealth through real estate ownership. We are your neighbors and friends and will continue to make the home buying and selling process as smooth and understandable as possible for consumers. You are our community, and we are yours. We value you and will continue to be here to serve you professionally, ethically, competently, and with concern and compassion.