The number of active listings is a reflection of how many new listings are coming on the market vs. how many are going off the market at the same time.
While today’s number of actives is 29% higher than it was last year at this time, let’s note that the 2023 inventory was a virtual flat line where they were selling as fast as they were coming on the market.
Any reason for alarm today?
Not really – more actives means there are more homes to choose from, which should mean more sales as long as the number of unsold listings doesn’t start looking like a glut and spook the buyer pool (apparently, the +29% is acceptable). So far, so good in 2024.
This year looks pretty strong! If you house isn’t selling, it ain’t the market’s fault.
Carmel Valley has had a real shortage of inventory lately, and from what we can tell from the bidding wars on the creampuffs, there are dozens of buyers in the hunt. This closed for $3,100,000 cash, which was $115,000 over list.
The recent NAR settlement clearly states that the MLS is prohibited from publishing a buyer-agent commission paid by the seller.
It means we might be hearing more commission talk, not less, as listing agents take responsibility for publishing the buyer-agent rate their sellers are offering.
It won’t last for long.
Many have speculated that the residential resale business is heading the way of commercial agents – an arena that has never had an official MLS, and where each listing agent decides their own policy on how to pay the buyer-agents.
Go to Loopnet or Crexi, the two commercial real estate websites of last resort (where agents put their listings after they have exhausted their stable of waiting buyers). You’ll read about cap rates, FARs, NOIs etc. but you won’t find ANY mention of a buyer-agent commission unless desperation is in play.
Why is that?
They want you to make assumptions (in order):
No commission is being offered to buyer-agents.
Some commission might be offered, but you have to call to find out.
The commission they offered over the phone won’t change.
Those are some hasty conclusions, and don’t be surprised if they are a moving target. Even when it gets down to putting terms in writing, the listing agents want to commit to a commission rate “as stated in the listing agreement” and hope you don’t ask questions. One agent this year said that the commission was on a sliding scale, depending upon how much I offer – but wouldn’t commit to any hard numbers.
Residential listing agents have always loved being vague so nobody can ever pin them down about keeping their word. When they figure it out that they don’t have to publish any commission rates, soon all will be offering zero (or close) to the buyer-agent – and will only acquiesce if they have no other offers.
A bad market will fix it though.
If the political hysteria over the next seven months freezes up the market, the motivated sellers and listing agents will be forced to pull out all the stops to make a deal – including the offering of a generous commission to buyer-agents. We haven’t seen a buyers’ market for 10+ years, so many won’t remember – but sellers will want to try everything else before they lower their price.
But will it come to that?
Probably not, because they will wait it out instead, and we’ll look up next year to see who is left! It won’t be the buyer-agents though. They are walking dead men, and by this time next year, single agency (buyers going direct to the listing agent) will be emerging as everyone’s solution.
The controversial local brokerage in Los Altos was offering a measly $10,000 commission to the buyer-agents on their listings, most of which were $4,000,000 and up. They listed a similar house on a quiet street about a mile away for $2,988,000 and then marked it pending a week later.
So I followed their lead and priced my listing at $2,995,000 even though mine needed EVERYTHING and was on a heavily-traveled street.
I wanted to prove that paying 2.5% commission to the buyer-agent would cause a better result.
Theirs closed for $4,200,000 (and was put up for rent for $2,900/mo).
Mine sold for $4,200,000 too, but then our buyer-agent volunteered to cut 1.5% of her 2.5% commission and deduct it from the sales price. In those cases, the lender has to get the appraiser to re-issue their appraisal at the revised price – but she forgot, which delayed closing for another week. I’ve never prayed so hard for an earthquake not to happen!
I don’t know if the agent on the other sale only got paid $10,000 to support her buyer with paying $1,200,000 over their list price, but she deserved more.
But combined with my buyer-agent being so generous, and the other comments at open houses, the agents around the Silicon Valley are so desperate that they are begging for business. The amounts buyers pay over the list prices indicate the same.
I still think my result was better than the $10,000 guy due to our harsh condition and busy street. But I can’t say that the 2.5% made any difference at all.
We can probably come to this conclusion though. In a scorching-hot entry level market, you don’t need to pay much to a buyer-agent, if anything at all. If the buyer-agent is smart, they will have their own agreement with their buyer to cover it.
In areas where the actives-to-pendings ratio is 4:1 or higher (Rancho, I’m looking at you), paying a reward or bounty to a buyer-agent is worth considering. Is that steering? No, it’s America, where paying incentives to get what you want should be legal and encouraged.
There is a new disrupter born every day! This one was created by a VC-backed appraisal company, so their gadget begins with a free appraisal to help determine the list price. Then they offer a little something for everyone – a week on the MLS for full exposure, then an auction-like event using the appraised value as the opening bid….unless a buyer wants to pay the Buy-It-Now price during the showing week! It doesn’t matter much what the whizbang feature is – all that matters is spending millions to advertise it to the masses:
If no offers are submitted once the Showcase Week ends, the home remains on the market at the pre-appraised value for a total of 30 days. This means that as long as a single buyer is willing to offer the pre-appraised value, the home will go under contract for fair market value within 30 days.
Fortunately, even if the Winning Offer Price is above the pre-appraised value, it’s unlikely that the second appraisal would come in below the contract price. See this FAQ to understand why.
In January, 30% of the NSDCC sales offered less than a 2.5% commission to the buyer-agents, and in February it was 25%.
Since the NAR settlement was announced on March 15th, 40% of the listings are offering less than a 2.5% commission to the buyer-agents.
There isn’t a new rule that directed listing agents to offer less commission. They just felt like doing it.
Is it due to the listing agents being weak and inexperienced? Or are the listing agents are still charging their full fee and taking more for themselves? Either way, they are under-appreciating of the job of buyer-agents, which isn’t good for their sellers.
What’s going on?
Agents who lack solid sales skills will offer a reduced commission rate as their reason to hire them. Importantly, these agents are unwilling to improve their skill set. They believe that completing the forms is all there is to being a realtor, and offering a reduced fee is the only way for them to get business.
Those who still charge their full fee but are now paying less to the buyer-agent are flat out greedy. Their commission rate is never disclosed to anyone besides the seller – at least not yet, and if the DOJ wants to focus on the nefarious, they can start right there.
Would you want either of those agents in your corner when the action starts?
Smart home sellers will recognize a critical issue.
The eventual sales price matters more than the commission rate.
Homeowners who don’t want to pay ANY commissions can sell their house to the buffoon who advertises on television. But he only pays 70% of the home’s value – yet he gets business because there are people who fall for the ‘quick cash and no fees’ enticement.
In addition, there are plenty of agents who offer a reduced rate in exchange for reduced services – but what real estate services can you do without? What are the vital sales skills needed to sell for top dollar?
The best agents have sales skills that cause your home to sell for more money, and they are successful enough that they don’t need your listing. Do you think they are going to discount their rate?
Are you going to hire a great agent who will push the sales price higher? Or will you settle for any old licensee just to save a point on the commission?
Reducing commissions aren’t going to make agents better, or have them put in extra effort. They aren’t going to do the same job for less pay. Because they agreed to be paid less, they will want to do less.
Is that who you want working for you?
The top agents employ a collection of superior sales skills that deliver a top-dollar sales price AND make the experience easy and enjoyable. Isn’t that what you want?
Most people think that the lawsuits are going to cause lower commissions, but if that happens, it will be in conjunction with the buyer-agents being eliminated. I’m calling it single agency for now.
Here is this week’s installment on the evidence supporting my theory. Even though I suspect this is BS like most of the things he says, he put this out for public consumption:
Kelman, for one, doesn’t seem too concerned about the settlement’s impact on his business.
“We’re just getting more aggressive about selling homes directly to consumers,” Kelman answered in response to a question about how Redfin is adjusting in the aftermath of the settlement. “There are so many people who called us over the weekend after the news of the settlement broke and said, ‘I don’t want to pay a buyer’s agent. I want to hire you to sell homes directly to homebuyers.’”
The new search portal, Homes.com (who wasn’t kidding about spending boatloads of money on advertising) is making a campaign out of Your Listing, Your Lead. They direct all buyer inquiries back to the listing agent, instead of sending to a third-party agent who pays for the lead.
But look at how much they are charging!
The only listing agents who are going to pay this money are the big teams – who will then be more excited about selling their listings directly to their own buyers, rather than co-op with buyer-agents via the MLS.
Forty percent of the NSDCC listings since March 15th (the day the NAR settlement was announced) have a buyer-agent commission under 2.5%. We saw the Berkshire Hathaway listing that didn’t offer any commission to a buyer-agent.
Being a buyer-agent is so tough that they aren’t going to do it for nothing – they will quit instead. Will buyer-agents convince buyers to pay them a full commission directly? No – they will quit instead.
It’s only a matter of time.
It isn’t what is best for buyers, and when buyers are harmed, it isn’t good for sellers either. Especially if the market slows. But here we are!
The potential surge in new listings has stalled, and for the second week in a row we had more new pendings than listings! But something has to give, doesn’t it?
The pricing continues to levitate, at the cost of sales:
NSDCC Monthly Detached-Home Sales, March
There will be the usual late-reporters that get this year’s number of sales up to 155-160 or so, and this trend should continue for the next 2-3 month where just the deserving homes get sold. It would seem to be inevitable that the number of active (unsold) listings start to pile up by the end of summer. Get ‘er done!
