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April 2024 * Market Update

Dated: April 6 2024

Views: 59

The real estate market is ever-changing and always evolving. That being said, the only constant is change. In March, the landmark case involving real estate commissions had NAR offer a potential settlement to the Plaintiffs for $418,000,000 and two changes to our business. These two proposed changes are: (1) clients and agents must sign a buyer agreement before showing houses. The agreement outlines the roles and responsibilities of each party and how agents will receive their compensation, and (2) all MLSs (multi-listing services) can no longer display buyer compensation as a field in their displays of listings.

In Virginia, it has been the law for more than a decade to have buyer agreements signed after the first substantiative conversation about real estate. At the time of the proposed settlement, only 18 states required signed buyer agreements. This practice is a good thing, in my opinion. The second proposal has added a lot of misinformation provided by – you guessed it - the media. Headlines are deceiving and often just plain wrong. Real estate commissions are not going away; they may be paid differently depending on how the seller chooses to offer compensation, but real estate agents will be paid because, as we all know, no one works for free.

Another misnomer is that Realtor fees drove prices up. Nothing could be further from the truth! Market conditions drive up prices, not our compensation. When the Fed lowered its rate to zero because of the pandemic, this caused mortgage interest rates to drop to the 2.25-3.5% range for an extended period. This caused a feeding frenzy on almost every house that came on the market, and prices escalated dramatically. Again, this had nothing to do with our commission rates. Then, the Fed increased rates drastically because inflation was rising, resulting in the mortgage rate lock we have discussed over the last two years. This lock, in conjunction with more people aging in place, has lowered inventory to historical lows. As we know, low supply and high demand result in higher prices. The market drives prices either up or down, not this settlement and, more importantly, Realtor fees.  

Prices will not come down because of the settlement - the market has, and always will, dictate prices. Another topic that has received attention is the statement that “commissions are now negotiable.” Realtor commissions have always been negotiable. With this settlement and the corresponding buyer agreements needed, many believe sellers will no longer offer buyer agent compensation. Sellers pay the listing agent a fee and allow them to offer part of this compensation to a buyer agent. Many sellers have said they were unaware of this and feel they would not have allowed their agent to pay someone to negotiate against them if they understood it. Agents need to better explain paperwork, the process, and what to expect as they progress to settlement.

In most cases, this will result in a more professional and streamlined experience. If the seller does not offer compensation to a buyer agent, the buyer will be responsible for paying their agent. This will be a fundamental switch, and many more conversations need to occur between agents and their clients about the pros and cons of offering compensation and the impact it has on their bottom line. Time will tell if the seller makes concessions, if lenders change guidelines to allow buyers to pay when they are a VA, FHA, or USDA buyer, and many other changes…stay tuned.

As always, we are available to speak with you about any of these changes and how they affect you if you are a seller or a buyer. Don’t hesitate to reach out, as we are never too busy for you!

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Jenifer Morin

Jenifer is a highly motivated and exceptionally organized professional with over 23 years of expertise spanning marketing, advertising, event planning, social media, graphic design, and administrative....

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