Buyers: Potential Changes in Real Estate Commissions Could Affect Your Pocketbook

The real estate industry has been shaken up by two class action lawsuits involving seller-paid buyer agent commissions. Historically sellers have compensated both the seller’s and buyer’s brokerages upon a successful sale, in a typical 50/50 split. Potentially, a significant shift could come in the way buyer’s agents are compensated and could directly affect buyer’s pocketbooks.

At the heart of the Sitzer/Burnett class-action lawsuits , the Plaintiffs allege that they paid too much in commissions to their agents, and want to essentially undo the contract they agreed to even though they were satisfied with the transaction. They allege that the National Association of Realtors® (NAR) has been conspiring to require sellers to pay buyer agent’s brokerage commissions, which have been inflated and go against federal antitrust laws.

The NAR will argue that compensation/commissions are and has always been negotiable. The seller chooses what fee they will pay for their agent’s representation, and how much of that fee goes to the buyer agent’s brokerage. The Multiple Listing Service (MLS) encourages clear cooperation between Brokers, and the MLS has benefitted consumers for 100+ years. Realtors ® (members of the NAR) abide by a Code of Ethics to “protect and promote the interests of the client.” There is so much value when using a real estate agent to represent a home buyer or seller. Agents only get paid when there’s a successful transaction.

If the plaintiffs win their lawsuit, it will undoubtedly lead to significant changes in how real estate commissions are handled. The biggest potential negative outcome could be that buyers would be responsible for compensating their own agents directly. Currently buyers already have to save up for their down payment and closing costs, which for many is a big reach, sometimes taking years for them to accumulate. So imagine if these buyers are suddenly on the hook for their agent’s commission, which could be 2.5 to 3% of the purchase price? This would translate to needing an extra $10,000 to $20,000+ in cash! Unfortunately, this will result in putting homeownership out of reach for many, especially the younger and lower to middle class America.

While the outcome of this lawsuit remains uncertain and the impact could take years to unfold, it’s always wise to stay informed and proactive when it comes to your future real estate purchase. Here are a few steps you can take:

Many consumers are not aware that the majority of buyer’s agents work solely on commission. They could spend hours showing you properties and write multiple offers on your behalf…they could even take you through the buying process…but if you don’t like the homes you are shown, you don’t get your offers accepted, or you cancel the transaction during the escrow process, they are NOT compensated. This often adds up to hours upon hours of no compensation.  Here’s what you get with a good buyer’s agent:

In a real estate market that’s constantly evolving, it’s crucial to be aware of potential changes and their impact on your home buying experience. The outcome of the lawsuit might be uncertain, but your ability to adapt and make informed choices is entirely in your hands.

If you would like updates on this issue or would like me to represent your interests in an upcoming purchase, contact me.

The post Buyers: Potential Changes in Real Estate Commissions Could Affect Your Pocketbook appeared first on Hawaii Real Estate Market & Trends | Hawaii Life.