The mainstream media outlets (WSJ and CNN) are highlighting the changes in realtor compensation one more time this week. They’re not offering anything new because they can’t find anyone who can predict what will happen, good or bad.
A summary of my thoughts on the topics:
Will commissions come down? Who cares about the overall result. A better question is whether you can get a lower rate, and the answer is yes, absolutely. If you don’t care about the quality of service provided, there will be more desperate realtors than ever. But it is due to the market conditions, not the commission lawsuit. The inventory of quality homes at decent prices is virtually zero, and sales have been plummeting:
Prices and rates have been sticky, so the dropoff in sales is likely to continue. The better agents will navigate the realtor changes more effectively, and pick up market share as the inferior agents struggle to sell anything. The national stat I saw recently was that 3/4 of the agents haven’t had a sale this year.
So you can hire an agent who offers a lower rate, but you only get one try at this.
Will home prices come down? No, not locally because only the creampuffs will be selling. Sales aren’t likely to improve because rates aren’t going to get much below 6% in 2024, no matter what the Fed does so the affordability will stay pathetic.
Do you need an agent? Yes, if you can find a great agent. You don’t need a lousy agent.
You have to consider the market conditions – they aren’t great. There is a lot of standing inventory because buyers only want a great match for a decent price – and they are rare. If you are a seller or buyer of a cool house priced attractively, consider the difficulties. I’m in one now – I made an offer to purchase a new listing over the weekend, and it’s Wednesday and I still don’t have a response. It is very frustrating on both sides – I’m sure the sellers think they should wait-and-see what else happens and hope I don’t go away. Tough for both sides to navigate this, and having a lousy agent makes your chances of a good outcome even worse.
Will sellers pay ‘concessions’ to cover the buyer-agent fee? You’re going to see mumbo-jumbo like this:
Seller agrees to consider fulfilling the Buyer’s obligation to pay Buyer’s Broker if requested by Buyer in the Residential Purchase Agreement at an amount agreeable to Seller subject to Seller approval of the terms and conditions of the Purchase Agreement.
But it doesn’t mean anything. Buyers should be prepared to pay your buyer-agent in full, and hope the seller might do a little something for you. But only on listings that are struggling. Do you want one of those? Lowballing the old listings is a real strategy.
Should sellers offer to pay concessions? Absolutely, because it’s only an offer, not a guarantee. Decide what to do once you get an offer to purchase, and it will be the lube that makes the buyer a little happier about paying more for your house because they don’t have to pay their agent too.
Will open houses be a nightmare? Yes, because non-agents HAVE to sign in, and the paperwork shuffle will take precedent over showing and selling houses. Be on the lookout for unrepresented buyers trying to make a deal with the agent on duty. If you see people whispering, that’s what is going on….and it means buyers should resign to paying for their buyer-agent in full to compete.
What will happen in 6-12 months? The buyer-agent will be extinct, except in higher-end areas where professional services are appreciated by those who value their time more than money. The main reason the buyer-agent will go away is because nobody within the real estate industry is standing up for buyer-agents. The brokerage admin people are already viewing the new rules as logistically more challenging (i.e., more paperwork) and a hot bed for more lawsuits, which is likely. It will be easier just to offer buyer-agents nothing and wish them luck.
This is the dawning of single agency – stay tuned!
I love it. The entire real estate transaction/realtor business is prime for disruption. It’s archaic. I don’t know what the end state will look like. I’m sure there will be some growing pains and teeth-nashing, especially from realtors who are being pushed out….but this is just a start to a better end state.