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Real Estate In the News

REAL News from the World of Real Estate 

 Addressing the recent media reports

April 5, 2024 

It has been impossible to miss the recent media frenzy over what is being heralded as a change in “rules” that allegedly set real estate broker compensation on home sales. According to many media outlets, these “rule” changes will lead to lower home prices and enhance affordability.

So what’s really happening? And what does this mean for you as a buyer or seller?

First, a little history…
For several years, the National Association of Realtors (NAR), the governing body that regulates much of the real estate industry and profession, has been involved in litigation around alleged price setting on how real estate brokers are compensated for their services. On a national and local level, buyer and seller commission rates have always been negotiable, and price setting has been prohibited.

In an effort to resolve these claims and move forward, NAR and the plaintiffs have agreed to a proposed settlement that is pending approval by the court system.

The proposed settlement
The settlement, if approved by the court, totals $418 million. Legal fees amounting to some number over $80 million will be paid first, leaving some number south of $340 million. This number is to be divided amongst millions of real estate transactions that occurred in 2022. Sources state the outcome equates to $10 to $15 per home seller to be paid out over the course of 4 years.

The changes
If approved, the settlement will ferry in three “new” requirements to the everyday practice of real estate nationwide. Note that this was a lawsuit that originated in a different region of the country and was based on localized practices that do not necessarily reflect other regions.

Mandatory Buyer Representation Agreements (BRA) – The days of consumers calling any realtor to tour a home are gone. In order to show a potential buyer a home, the buyer must sign a BRA committing to work with the broker showing them the home. One of the components of the BRA will be the amount the broker will be compensated for his/her services and how and when this sum will be paid.

Some states, Washington for example, have already adopted this practice. In most states, including Oregon, we have worked with BRA’s for years. Many of us routinely have utilized these contracts. The only real change will be that all brokers will now be required to do so.

Just as sellers carefully select their listing broker, buyers will need to be thoughtful about how to choose the broker who will provide them the best representation and service as they journey through one of life’s largest asset acquisitions.

Decoupling the real estate commission – Listing broker fees must be separated from the buyer’s agent compensation. In Oregon, our current listing contracts have required this practice for many years so nothing new on this front in our market.

Buyer’s agent commission (BAC)
For years we as licensed brokers in Oregon have been required to publish the BAC in the multiple listing service (MLS) for brokers to see upfront. The new rule will prohibit this information from being published in the MLS.

What does all this mean?

1. Buyers will need to make a conscientious decision as to which broker to work with early on in their home search. This selection can be critical to their ultimate outcome in finding and buying the home of their dreams. They also will need to budget how to pay their broker. For many buyers already stretched to come up with down payments, loan costs, escrow fees, and the cost of high interest rates, this may impact how much house they can afford.

2. Sellers will, as always, be able to elect whether or not to offer compensation for the buyer’s broker (BAC). Buyers trying to stretch their buying power by minimizing costs may opt to consider or not consider a home based on this factor simply due to affordability, loan qualification considerations, and other factors.

For us as Realtors in the trenches, a lot more time will be expended for our buyer clients in determining which sellers are offering to pay the buyer broker compensation as it will no longer be obvious in our multiple listing portal.

Our services as buyer’s agents
As buyer’s agents we are your eyes and ears out there in the market. We are constantly monitoring and sharing new inventory with active buyers, previewing and showing homes, discovering “pocket” inventory via our network, and negotiating the best possible price and terms for our buyers on their purchase.

Once in contract, we provide decades-honed negotiation skills and expertise in the many nuances/details of a real estate transaction. There is much to consider when purchasing a home, and we are here to make sure every detail is carefully managed.

In Summary
Will these rule changes bring prices down for homes due to the media reports that commission rates have created “artificially inflated costs to sell homes”?

We doubt it. For decades, sellers have had the option to hire a discount broker offering minimal service levels and representation versus a full service brokerage company like ours. This “Limited Representation” has been a required field on the MLS listing contract for many years, and it is a very different service model than the extensive marketing and transactional services we offer our clients.

We have seen many changes throughout our careers, and we know that buyer demand and inventory levels are the most reliable factors in establishing home sale prices.

Sellers can influence the sale price of their home by improving the home’s condition, of course, but in our experience commission rates have not played a significant role in prices to date.

If our successful track record in real estate has taught us anything, it’s that change is inevitable. We are fully committed to each of our clients in explaining the home buying and selling process as their advocate in what is best for their personal situation and outcome. And we always adapt!

We welcome your queries and conversations around all this and are available for complimentary consultations at any time as we continue to provide you with unparalleled service.

Thank you for your trust in us.

Kevin Hall 503-799-7255 | Kathy Hall 503-720-3900

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 Email Kevin:  [email protected]