Eliminating or even negotiating 6% commissions on real estate transactions could introduce a challenging scenario for home buyers, warns an economist.
Expressing skepticism about the recent settlement, the economist hopes the presiding judge will dismiss it.
A significant transformation looms over the housing market following a groundbreaking settlement by the nation's largest real estate association. This impending change is poised to revolutionize the process of buying and selling homes. However, I think that the proposed alteration could swiftly burden buyers with additional expenses.
The settlement, announced by the National Association of Realtors and slated for mid-July implementation pending approval, mandates that listings on the NAR-operated multiple-listing service no longer disclose the commissions buyers' agents would receive on a sale. Essentially, buyers' agents would not receive upfront compensation.
Although real estate agent fees are negotiable, they typically range from 4% to 6% of a home's sale price, varying based on local market practices. Traditionally, home sellers cover these commissions, which are usually divided between the buyer's and seller's agents, with buyers not directly paying their agent.
This settlement is viewed favorably by home sellers, as they will no longer be compelled to offer commissions to buyer's agents, potentially saving thousands of dollars. However, who's going to pay the buyer's agent?
Under the new rules, while sellers could still opt to pay a buyer's agent separately, many may choose not to do so, leaving buyers responsible for their agent's fees. For instance, for an $800,000 condo at the Yacht Club at Portofino, a 3% commission to a buyer's agent would translate to an additional $24,000 in expenses for the buyer, on top of down payments and closing costs. Who's the buyer who's going to accept paying on top of the house his realtor? I personally imagine that buyers will search online, find their dream house and contact directly the selling agent in order to avoid paying realtor's commissions.
Though commissions remain negotiable, offering lower fees could prolong the house-hunting process for buyers. Additionally, written agreements specifying service costs with agents would become mandatory under the proposed settlement, raising concerns about potential conflicts of interest.
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