Everyone is talking about the National Association of Realtors (NAR) lawsuit settlement, and I have a few thoughts too. It’s important to cultivate objectivity and keep some things in mind about buyers, sellers, and concessions.
UPCOMING SPEAKING GIGS:
3/21/24 2024 Market Update for Brent Gove Team (big event free)
3/26/24 Orangevale MLS meeting 9am
4/11/24 Lindsay Carlisle Event (private)
4/25/24 HomeSmart iCare Realty (details TBA)
4/26/24 Prime Real Estate (private)
5/9/24 Empire Home Loans (details TBA)
5/15/24 Investor Meetup (details TBA)
6/6/24 Golden 1 Credit Union (details TBA)
6/11/24 Elk Grove Regional MLS Meeting 8:30am
6/13/24 Sacramento Realtist Association (details TBA)
WE NEED TIME TO SEE THE TREND
There are so many ideas about how the NAR settlement will affect the housing market, but we need time to understand what this is going to mean for the marketplace. What will it mean for real estate agents, sellers, and buyers? And what will it mean for comp selection? Do we start to think of the buyer’s commission as a concession too? The truth is change is on the horizon, but only time will answer these questions. My advice? Stay focused, stay hopeful, stay grounded, avoid sensationalism, and figure out how you need to adapt if you work in real estate.
THE FUTURE WILL HAPPEN NO MATTER HOW YOU FEEL
If you work in real estate, here’s my advice. Cultivate objectivity, stop doomscrolling, read all you can from trusted sources, avoid sensational voices, and stay away from the comment section. There are some seriously toxic threads right now, and it’s not likely to do anything constructive for business or mental health to drink from the firehouse of 24/7 content. But hey, if that’s your thing, go for it. All I’m saying is it’s easy to get drunk on worry and fear, but I have to think there is a better way. The truth is the future is going to happen no matter what. Either you’ll get there after stressing for months ahead, or you can get there after being intentional about cultivating objectivity, purpose, and a plan.
EVERY ESCROW WON’T BE THE SAME
There are many strong ideas right now, and often the truth is found somewhere in the middle with most things in life. The thing to remember about escrows is it’s not going to be the same thing for every transaction ahead. Some sellers will offer a commission to the buyer’s side, sometimes it will be a hybrid situation where it is less than expected but something, sellers will still offer credits of various kinds to help the buyer, and other times the seller is not going to offer anything. We don’t know right now how much of each category will exist, so only time will tell. I find some people are saying it’s the death of the buyer’s agent, but others are convinced nothing at all will change. Who is right? The market will let us know eventually. Personally, I’m not a fan of either extreme. Ultimately, buyers will figure out how to navigate their end to make things work, and sellers will figure out what it looks like to be able to command top dollar.
WILL BUYERS BECOME MORE SENSITIVE?
One thing on my mind is the psyche of buyers. In recent years, buyers have become really picky about condition, price, and location, and I’m wondering if we’ll see more sensitivity ahead. I think the key is what happens in the marketplace. If we see buyers having to pay more out of pocket, it’s not hard to imagine more sensitivity. Also, will buyers expect to pay a lower price? Will we see more FHA financing since FHA allows up to 6% as a credit? These questions will only be answered as the market unfolds.
WILL SELLERS BOTH FLEX AND LISTEN?
The temptation for sellers right now is to flex all the money they’re going to save by only covering the commission of the listing agent. Well, here’s my advice. Sellers, don’t forget to listen to buyers while you are flexing. The reality is buyers are struggling to afford the market right now, and many buyers are going to need to find a way to cover the cost of a buyer’s agent commission. This is where sellers come in by offering something to the buyer’s side. Look, we don’t know what the market is going to look like, and every escrow is likely to look a little different. I’m just saying, don’t sleep on the idea of needing to meet buyers where they are at right now.
WILL A COMMISSION BE A CONCESSION?
Commissions for the buying and selling side have basically been baked into the market, so it’s not really something appraisers have had to consider because these fees have been normative. Well, with a buyer’s agent commission now potentially being handled like a concession, this is something new that we need to analyze. The gist is we’re going to have to see if there is any price difference between homes with and without the buyer’s agent commission covered. This isn’t just something appraisers will have to ask either. Real estate agents are going to dig into this, and savvy buyers too. If you were a buyer looking at comps, wouldn’t you ask, “Did the seller pay for the buyer’s commission on this one?” That seems like a relevant question when considering what to offer, right?
APPRAISERS AREN’T TRYING TO BLOW UP DEALS
When looking at these comps, does it seem like concessions inflated the price? Do you see how properties with concessions generally sold for more? In this situation, if an appraiser was using these properties as comps, it would probably be fitting to adjust some of the comps down since concessions look to have boosted the price. Appraisers don’t do this to try to blow up deals or devalue properties. Keep in mind, an inflated contract price might help a deal happen, but that doesn’t mean the property is actually worth that amount. Yet, appraisers don’t always adjust when there are concessions. Imagine a scenario where homes with and without concessions sold at the same price. In a case like that, it’s hard to justify an adjustment if these homes are all at the same level. Maybe the sellers who gave concessions were generous, full of compassion, or maybe they needed to move quickly and appeal to buyers.
I wrote more about concessions here. I’ll keep writing as needed too.
GETTING INTO TROUBLE
I’m not an attorney, and I don’t have legal advice, but I’d recommend for real estate friends to be very careful about commission language in light of antitrust laws. I strongly recommend brokerages to have conversations about this with your agents. What can you discuss? What is off limits? I’m surprised at some of the comments I’m seeing online, and I’m concerned for some friends who are talking in such a way to advocate for a minimum concession amount.
CLOSING THOUGHTS
This is a loaded issue, and it’s a bit of a hot mess right now to say the least. My advice? Don’t let this overwhelm you, but it’s important to talk about potentials. Keep in mind, this isn’t even official yet. A judge still needs to ratify the decision. Ultimately, the market will figure this out, and people who work in real estate will figure this out too.
Thanks for being here.
Questions: What’s on your mind about the lawsuit settlement? Is there anything you anticipate about the future?
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