Yesterday, it was announced that CoStar is buying Matterport. Excerpts:
I look forward to welcoming Matterport to the CoStar Group family and believe that we will be stronger together, in pursuit of our common mission,” said Andy Florance, Founder and CEO of CoStar Group. “The world has changed and today a Matterport is the new open house or property tour. People now select their next home, apartment, office, store, hotel, or warehouse on their mobile device often without ever visiting the property. There is no better way to remotely experience space than via Matterport. CoStar Group intends to support and invest in research and development opportunities to further develop Matterport’s spatial technology, including the application of AI and machine learning to extract information from the 3D spatial data library as well as using generative artificial intelligence to imagine and reimagine physical spaces.”
CoStar Group operates some of the most effective and widely recognized real estate information solutions and online property marketplaces in the world including Apartments.com, LoopNet, CoStar, and Homes.com, all of which feature Matterport’s 3D virtual tours.
In March 2024, there were over 7.4 million views of Matterport 3D Tours on Apartments.com, with consumers spending 20% more time viewing an apartment listing when Matterports were available. CoStar Group intends to utilize Matterports in a similar fashion on Homes.com to further enhance the most comprehensive agent, seller and buyer friendly residential portal on the market.
Great timing! Just when a new rule is going into effect that requires home buyers to hire an agent before touring a home, CoStar will be pushing their 3D tours as a way to experience the home virtually. Buyers who haven’t signed with an agent or those who wish to be unrepresented will have a great tool to use to preview the homes online without commitment.
But then what?
What will happen when a buyer who has only seen the home online wants to buy it?
The renegade buyers will have their attorney draw up a contract. Good luck with presenting that to the listing agent! Others will finally grab an agent friend and comply with the new rule to tour the house in person with their hired buyer-agent.
If you are going to wait until the last minute to hire a buyer-agent, then make sure to check their Zillow profile to see how many buyers they have represented in the last 12 months. It won’t do much good to hire an agent, only to find out the hard way that they aren’t very good at getting buyers to the finish line.
The Unrepresented Buyer
Between the advanced online tools and the realtor implosion, more and more buyers will resist hiring a buyer-agent, especially with the real threat of having to pay them a big fee out of pocket now.
By now, you know where this is going.
More buyers will be going direct to the listing agent – a practice which listing agents will be encouraging!
But the buyers will be divided into two camps.
Those who want to go direct to the listing agent to ‘save the commission’, and those more desperate buyers who just want to buy the house. Guess which one will get the house.
But let’s say there is only one buyer, and he insists on being unrepresented and wants to save the commission. The conversation with the listing agent will go like this:
Buyer: I see you are offering a 2% commission to the buyer-agents, and I’m unrepresented so I want to save the 2%. Will you knock it off the price or give me a credit for closing costs?
Listing Agent: Every buyer has to be represented, sorry.
Buyer: Ok, adios.
Listing Agent: Now hang on, maybe we can work something out. I’ll talk to the seller.
Listing Agent to Seller: I have an offer of $2,940,000 on your $3,000,000 house. Close enough?
Seller: It’s only been 30 days – is that all we got?
Listing agent: Yes, and rates are going up and Trump will be tweeting from jail soon. You should take it.
Seller: Ok, but I want to take my $4,000 toilet.
Listing Agent to Buyer: Ok, I got you the house for $2,940,000.
Buyer: Did you knock 2% off your commission?
Listing Agent: That’s between me and the seller.
The listing agents will be charging their regular commission rate well beyond July when the new rules take effect. They hope more buyers will be coming direct to them to buy their listing. At first, they will want all buyers to have their own representation (dual agency) so they can keep both sides of the commission.
If the buyer wants to be unrepresented, that will be ok too. The listing agent will keep the full commission and just get the seller to eat a little discount instead – and commissions are never disclosed to the buyer.
The common perception is Yes, because commission rates aren’t determined by any regulatory body, and brokerages/agents are free to devise their own compensation plan.
But the agents who have a meaningful skill set and a book of business have determined their fee. They aren’t going to work for less just because the NAR blew their defense of a two-bit lawsuit in Missouri. In addition, the consumers who are convinced that their agent is worth it will pay their fee to ensure they get quality help that delivers the best results.
If you want to negotiate the fee, you will have to find a different agent.
The exodus of incompetant realtors leaving the business over the next 2-3 years will be significant, and their commission rate will be more negotiable than ever. Will consumers take a chance on the has-been agent hoping to eek out one last deal before they quit, just to save a point? Unfortunately, the answer will be yes in many cases.
How bad is it? I could tell a new story every day.
How about the listing agent wants to give his 80+ year old seller the personal touch, but he doesn’t like driving the 30 minutes to her house….so completing the final documents to close escrow has been stalled. The seller is moving to Arizona, and she had to get her realtor there to help her fill out the forms!
Hopefully the result of the Big Shakeout will be that consumers investigate thoroughly the services that realtors offer, and understand that different agents do different things. There will always be the agents that offer to do less – carefully examine whether reduced services are in your best interest.
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.
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 conspiring events – softer market, fewer and less-experienced agents, and lower commissions – are all leading us to the same place:
The destruction of the traditional model of residential real estate sales will be triumphed by the unknowing, but it will be the worst thing to ever happen for consumers because agents will be so tempted to tilt the table.
The only savior will be the company that brings home auctions to the masses.
Oh, you’re going to get lower commissions alright – on the backs of the buyer-agents.
The last time I checked a couple of months ago, there were 30% of the monthly closed sales that offered a buyer-agent commisssion under 2.5 percent. Of the 92 closings so far this month, 25% of them were under 2.5% – and those were determined before the NAR debacle.
The listing agent determines how much the buyer-agent gets paid.
Not the seller, not NAR, not the attorneys – it is the listing agent who decides the commission rate to offer the buyer-agents. It makes for an easy solution. Want a lower overall commission rate? Just take it off the amount paid to the buyer-agent. What’s worse is the MLS rule that buyer-agents are not allowed to negotiate the rate – hopefully that will go away now.
Listing agents aren’t lowering their commission rate – they are taking the same or more than ever, and paying less to the buyer-agents. They are under-appreciating the amount of work it takes to conclude a successful buyer-side transaction (usually 3-6 months of frustration and losing).
If the listing agent has superior skills that result in a higher sales price and a smooth transaction, then no one will mind them getting paid accordingly, but their success is also at least partially due to the buyer-agent doing his job well. The good buyer-agents shouldn’t be penalized, and ideally, there would be a sliding scale based on performance.
But because everyone will be hearing that commissions are negotiable (for the first time, says Biden), the listing agents who feel the need to agree to a lower rate with their sellers will just subtract the same discount from the buyer-agent side. But is that in the best interest of the seller?
This practice will expedite the demise of the buyer-agent.
Every realtor-related entity is scrambling right now to train agents how to get their buyers to agree to a contractual relationship where the buyer pays the buyer-agent commission.
It would all be well and good – and be similar to the listing agreement we have with sellers – if it weren’t for the paragraph in red above that allows for cancellation by either party. Even if the parties agree to Exclusive Representation, the buyer can still cancel with a 30-day notice (in C1ii). Both boxes on the left need to be checked to eliminate the option to cancel.
The big problem is that listing agents will be advertising to buyers to come direct to them to buy their listing and not pay ANY commission.
Will agents be able to convince buyers to sign the Exclusive Representation with no cancellation? Or will it be a happy compromise just to agree to representation that they can cancel at any time. Yes, the happy compromise will be preferred, mostly because it is so clearly laid out on the form.
But it means that the minute the buyers see a hot new listing advertised as No-Fee-If-You-Come-to-Me, they will cancel their existing buyer-broker agreement and go direct to the listing agent.
Buyer frustration builds quickly even if you have a great buyer-agent because the good deals or cool houses are competitive and almost all picky buyers will lose a few bidding wars before they win one. Buyers don’t like losing houses they had their heart set on winning, and the temptation to go direct to the listing agent – especially when you can save the fee – will be very high.
I’m guessing this will all blow over in a few months because listing agents will be advertising to buyers directly – leading with the No-Fee-If-You-Come-to-Me mantra – and it will expedite the industry’s transition to single agency, and eliminate buyer-agents altogether.
The reporting on the NAR settlement seems to be focused on creating hysteria, rather than finding the truth. Realtors commissions have always been a juicy topic, and the media is intent on using this opportunity to fabricate wild and salacious stories to attract the maximum number of eyeballs.
The hysteria may just be beginning, however. The NAR settlement included penalties for every brokerage that sells more than $2 billion in volume per year. For Compass, the top brokerage in the country for total volume, it means imposing a fine of $500 million without consulting with Compass management, let alone negotiating. The NAR doesn’t have the authority to speak for us, or commit us to any penalty so who knows what they were thinking but it guarantees the end of NAR – why would any brokerage want to be associated with such bums?
Those fines will get litigated and drawn out for years. The requirement to remove the commission rate in the MLS will start in July, but listing agents can advertise the amount of buyer-agent commission everywhere else. We will hear more about the buyer-agent commission than ever before – and steering done by both buyer-agents and buyers themselves. Buyers will prefer the listings that pay more commission, so they pay less. So much for fixing the concerns about steering!
As realtor-panic goes, the beginning of Covid was much worse – we didn’t think we’d sell a house for months! Those who panic about this hiccup are the realtors who don’t have much to offer – those who aren’t real salespeople. Nobody will mind seeing them either get better, or get out of the business.
But houses will keep selling at a brisk pace regardless of commissions.
This will blow over in a few months.
My previous post mentioned the need for getting good help. Getting cheap help will probably be tempting until people get a feel for the difficulty of what it’s like:
We made a clean, full-price offer. Three days later, still no answer.
We made an offer on a Friday that was $50,000 under list on a 2-br house in original condition. The sellers decided to take their chances with open houses (in search of two in the bush) over the weekend, instead of responding. We attend, and the listing agent isn’t doing the open house; there is a trainee there instead. We look harder to find something better, and succeed. By Monday, the listing agent wants to re-engage, and by Wednesday she begs me to get back in the game. They receive another offer, but it’s $100,000 under list. We moved on.
I’ve had several solid buyers attend open houses in the last year – people I’ve talked to who sure gave me the feeling that they liked the home so much that they were going to make an offer. But then when I follow up with their agents – who usually don’t accompany – they can’t close the deal. It makes me want to sell my listing to their buyer and just send them a check in the mail.
Multiple offers – what do you do? I lost another one where we offered the exact same price ($100,000 over list), and the listing agent seller picked the one with the bigger down payment, instead of letting the buyers decide it. Don’t you think there might be some gas left in the tank? Like $25,000 to $50,000?
You get an offer while off-market. Then what?
When does a seller lower their price? Or not?
Buyers and sellers typically have little experience in fixing things – especially the big stuff – and agents aren’t much better. So instead, a proper discount is attempted, but sellers always think in pennies, and buyers think in thousands. With little or no buyer representation, how are those going to get handled? They’re not, and more deals will die. This is a problem on virtually every sale.
Inexperienced people tend to over-react, and any bump in the road could be a deal-killer.
How much should buyers offer? Most agents respond with, “Well, that’s up to you”.
What is the real value of the property? Once a home is on the open market, Zillow and Redfin adjust their estimates to within a buck or two of the list price, so sellers, buyers, and agents must each determine the value themselves. How good are they at determining the value? How much variance is acceptable? Virtually nobody knows, and unless there is a good agent involved, more deals that are 1% to 2% apart will die an unnecessary death.
How do you know when you’re talking to the wrong agent?
Their only line is “Let me know if you have any questions”.
Good salespeople ask the questions, and then offer opinions and advice!
The commission lawsuits are the best thing to ever happen for my slogan! Get Good Help!
What a headline! Nowhere in this article does it say that NAR is slashing commissions or that any agents – the people who determine the commissions – have agreed to slash the commissions. The weak, spineless agents who have nothing else to offer will gladly agree to work for less because to them, it beats not working – but consumers suffer when they hire a weak agent.
Nothing will change until consumers realize that the key is to GET GOOD HELP!
There will be only one result from these commission lawsuits. The buyer-agent will be eliminated in the name of ‘saving money’, and home buyers will be forever harmed by not getting any, let alone adequate, representation.
Nobody from the industry is quoted in the article, and they published the most outrageous quotes they could find.
Excerpts:
Housing experts said the deal, and the expected savings for homeowners, could trigger one of the most significant jolts in the U.S. housing market in 100 years. “This will blow up the market and would force a new business model,” said Norm Miller, a professor emeritus of real estate at the University of San Diego.
The lawsuits argued that N.A.R., and brokerages who required their agents to be members of N.A.R., had violated antitrust laws by mandating that the seller’s agent make an offer of payment to the buyer’s agent, and setting rules that led to an industrywide standard commission. Without that rate essentially guaranteed, agents will now most likely have to lower their commissions as they compete for business.
Economists estimate that commissions could now be reduced by 30 percent, driving down home prices across the board. The opening of a free market for Realtor compensation could mirror the shake-up that occurred in the travel industry with the emergence of online broker sites such as Expedia and Kayak.
“The forces of competition will be let loose,” said Benjamin Brown, co-chairman of the antitrust practice at Cohen Milstein and one of the lawyers who hammered out the settlement. “You’ll see some new pricing models, and some new and creative ways to provide services to home buyers. It’ll be a really exciting time for the industry.”
Under the settlement, tens of millions of home sellers will likely be eligible to receive a small piece of a consolidated class-action payout.
The legal loss struck a blow to the power wielded by the organization, which has long been considered untouchable, insulated by its influence. Founded in 1908, N.A.R. has more than $1 billion in assets, 1.3 million members and a political action committee that pours millions into the coffers of candidates across the political spectrum.
The antitrust division of the Department of Justice is continuing its investigation of N.A.R.’s practices, including the organization’s oversight of databases for home listings, called multiple listing sites or the M.L.S. The sites are owned and operated by N.A.R.’s local affiliates. For decades, the Justice Department has questioned whether these databases stifle competition and whether some N.A.R. rules foster price-fixing on commissions.
Some experts said the shift on commission structure, and the billions of dollars that would flow into the housing market as a result, could spark a recovery in the housing market, going so far as to say that it could be as significant as the 1930s New Deal, a flurry of legislation and executive orders signed by President Franklin D. Roosevelt designed to stabilize and rebuild the nation’s economic recovery following the Great Depression.
“This will be a really fundamental shift in how Americans buy, search for, and purchase and sell their housing. It will absolutely transform the real estate industry,” said Max Besbris, an associate professor of sociology at the University of Wisconsin-Madison and the author of “Upsold,” a book exploring the link between housing prices and the real estate business. “It will prompt one of the biggest transformations to the housing market since New Deal-era regulations were put in place.”
Despite N.A.R.’s turbulence over the last several months, however, there was one constant: their insistence that the lawsuits were flawed and they intended to appeal. With Friday’s settlement agreement, N.A.R. gave up the fight.
The settlement includes many significant rule changes. It bans N.A.R. from establishing any sort of rules that would allow a seller’s agent to set compensation for a buyer’s agent, a practice that critics say has long led to “steering,” in which buyers’ agents direct their clients to pricier homes in a bid to collect a bigger commission check.
And on the online databases used to buy and sell homes, the M.L.S., the settlement requires that any fields displaying broker compensation be eliminated entirely. It also places a blanket ban on the longtime requirement that agents subscribe to multiple listing services in the first place in order to offer or accept compensation for their work.
“The reset button on the sale of homes was hit today,” said Michael Ketchmark, the Kansas City lawyer who represented the home sellers in the main lawsuit. “Anyone who owns a home or dreams of owning one will benefit tremendously from this settlement.”
From the NAR President:
NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS. Offers of compensation could continue to be an option consumers can pursue off-MLS through negotiation and consultation with real estate professionals. And sellers can offer buyer concessions on an MLS (for example—concessions for buyer closing costs). This change will go into effect in mid-July 2024.
