OT: NAR agrees to $418 million in damages. A boon to home sellers/buyers?

[.RJ]

Originally Posted by avalonracing

Just remember when you are buying a new home to not complain about the fee you'll be paying if you decide to use a competent buyer's agent. And if we are still in a seller's market when you buy, a competent buyer's agent can make all the difference as to whether your bid is accepted when you are bidding against other buyers who have good agents.

I think that the model is somewhat broken, but it likely evens out in the end over time spent on both ends of the deal - a buyers agent likely spends a LOT of time with their buyer, potentially over several years. So in a sense the buyers agent is paying it forward for the next guy.

[pff]

Originally Posted by echappist

And I've seen some horrendous pictures taken by seller's realtors. Badly-lit photos, blurry photos, and photos taken on a cloudy day, etc.

The photography produced often isn't much better compared to what an amateur who understands light can produce with a DSLR.

Professionals charge ~$500-750 for RE photography session for something ~2,500 sq ft (often less). For a $600k house on which the seller's agent gets 2.5%, that's $15k to sell-side agent. The sell-side agent better be offering a lot more than a $750 photo sessions to charge $15k.

Last house I sold, they turned up the HDR knob to 11 and hosted 2MP images at fullscreen on the sales website. I was livid. I told them to fix it, and they said that's "industry standard".

Real estate agents are obsolete in the internet age.

[Andy340]

Agree that good agents earn their % but how do you know upfront who is good? We have had good agents in the past and only realized afterward that prior agents were not so good (on buy and sell side). Easy to swap out if part of a relocation package as same firm (they want to keep relocating company happy etc.) but more difficult if this is not the case. Strategy for initial pricing, staging etc. all help but back room discussions are closed sessions so buyer/seller doesn’t have real insight into these.

Moving from East to West coast, biggest difference was using attorney in MA (useful and did all required for upfront fee) vs escrow in CA (useless and no idea what value was provided).

[professerr]

Originally Posted by HTupolev

Since the beginning of human civilization, no invention has ever been devised which instills more suspicion than an argument against conflict-of-interest beginning with "fiduciary duty."

Ha, indeed. I remember sitting down with my elderly dad and his "investment advisor" who was charging some absurd % to stick him in a bunch of really crappy, expensive managed funds run by his own firm. At some point during my questioning, he piously gave some “fiduciary duty” speech. We were gone a minute later.

I’ve dealt with many, many real estate agents. I’ve never heard one trot out that line, but if I did walk right away — a total red flag. And the more huffy and indignant they get, the faster I run.

[fourflys]

so one issue I just heard that may come out of all of this is an issue with VA loans.. with a VA loan, the buyer is not allowed to pay a commission per the VA.. I mean, I bet a savvy seller could roll it in the price of the home.. might get looked at for not being above board, but could be hard to prove maybe.. just something to think about..

[Ralph]

I really don't understand this settlement. The RE agents I know around here would already negotiate on rates. When I almost listed a home recently, the agent readily agreed to a 4% selling commission split evenly between selling agent and buyers agent. On another home a couple years ago, the listing agent thought a 4.5% rate was fair. 2 % to selling agent, and 2.5% to a buyers agent....to entice them to your listing.
My neighbor just listed his home and it sold in 2 days. The listing agent hired contractors to spruce up the yard, do some exterior and interior painting, and to stage the home for open house with some rental furniture. My neighbor listed for 5% and gave the selling agent 3% for all the excellent work he did. He earned that full commission and got $20,000 over what he expected. He earned that commission on a $595,000 house. I think you have to be careful with how you list now.
Another neighbor of mine is a practicing lawyer who also sells some RE. What would it be worth to have a lawyer as your buying agent?

[echappist]

I read a few articles on the settlement. First "mid-July" is mentioned; is there a concrete date (e.g. July 15/16)?

Next, it seems the proposed change makes the water murkier if anything. From this article in the WSJ (gift link)

Starting in July, most home sellers won’t need to make an upfront offer for how much they will pay a home buyer’s agent. That means if home sellers won’t cover the cost of the buyer’s agent, buyers could have to pay their agents out of pocket.

Home shoppers paying directly for each task an agent performs could save buyers $30 billion a year compared with under the current system, because buyers would negotiate for lower prices and tour fewer homes, according to a working paper released by economists at the Federal Reserve Bank of Richmond.

In a seller's market, this pretty much allows some sellers not having to pay the entirety of what used to be 2-3% allotted to buyer's agent, and the burden is now transferred onto buyers. Furthermore, it won't surprise me if some sellers won't lower the listing price by 2-3% to account for the fact that they no longer have to pay those fees

Imagine two offers for a $600k house, both having escalating clauses up to $650k. One say requests seller to pay certain fee; the other waives that requirement. It's pretty clear which one the seller would pick, but previously there would have been no difference. What makes this worse is that seller's policy does not have to be stated upfront. If it were, buyers would be on equal footing.

In a buyer's market, a seller would then be more likely to offer some compensation to buyer's agent.

What would have been magnitudes better is the removal of possibility of seller paying for buyer's agent. At least then, everyone can then factor in the 2-3% discount (or whatever flat fee agreed upon previously).

This settlement also doesn't fundamentally address the issue of the higher frictional cost Stateside vs Europe.

Personally, if I'm still looking past July, I'd be looking for a RE attorney with a license.

[avalonracing]

Originally Posted by fourflys

so one issue I just heard that may come out of all of this is an issue with VA loans.. with a VA loan, the buyer is not allowed to pay a commission per the VA.. I mean, I bet a savvy seller could roll it in the price of the home.. might get looked at for not being above board, but could be hard to prove maybe.. just something to think about..

This is correct, a VA buyer may not pay their agent. Nor can the agent's commission be part of the buyer's loan. As for your idea above about the seller rolling the commission into the price... that sounds a bit like the way it has been done this whole time. This whole settlement is half-baked.

[htwoopup]

The issue is “steering”. Because of that this won’t change a thing. A seller can negotiate with his agent. But if the buyer’s agent expects to get 3% he will steer buyers away from properties that he won’t get 3%. And it is legal currently. There may be ways around it, but then again there are ways a buyer’s agent could technically go after the buyer for the difference. In short, this does nothing and more work is to be done. A good precis of the issue is in the Economist…. https://www.economist.com/finance-an...ve-and-kicking

[dmitrik4]

Originally Posted by Gummee

Your agent is making bank on those transactions, but the majority of agents aren't.

Lots of part time agents, moms, or retirees that 'work' in the RE business

M

This. A majority of deals are closed by a small minority of agents. Most licensed agents sell maybe one house a year, or just have a license as part of their job.

[dmitrik4]

Originally Posted by Alistair

$30k of time? lol.

They pay the photog and their office with that money, and split it with their brokerage. If your agent is taking the pics themselves you need a better agent.

Commissions were always negotiable but it was hard for buyers/sellers to know that. And not every transaction warrants a traditional 3% commission; some deserve less and some deserve more. It’s an asymmetrical analysis: from the agent’s perspective it probably averages out, but each buyer/seller has a much more narrow perspective. But from the agent’s perspective, they don’t know up front which kind of client/deal you’re going to be.

Honestly at this point no one commenting (here or especially in the media) really knows how this will all shake out. Anyone who tells you otherwise is fooling you. In the end, it behooves sellers to make their listings as attractive as possible.

[dmitrik4]

Originally Posted by Alistair

But as a seller, why am I paying the buyer's agent? I'm paying somebody $12,000 (3% of a 400k purchase) or more who I've never met, never interacted with, and as far as I can tell provides zero value to me beyond unlocking my door to do a showing. My agent can unlock the door. Or I can unlock it.

I'm not saying the buyer's agent doesn't provide value, but that value is to the buyer, so that's who should pay for the service.

Yes, I acknowledge that 1-2% of $400,000 is a lot of money for the buyer to cough up. As a seller, I'm not sure I care.

You’re offering comp to the buyer agent because it makes your house more appealing than a similar house that isn’t.

[Alistair]

Originally Posted by dmitrik4

You’re offering comp to the buyer agent because it makes your house more appealing than a similar house that isn’t.

It’s only more appealing to the agent, I bet the buyer would rather get a reduced price.

And nobody has explained to me why the agents in the US are worth more than just about everywhere else (many of which have the buyer pay their own agent).

[dmitrik4]

But if I’m the buyer I’m paying that either way. My reduced price means I’m paying more out of pocket (mortgage companies don’t allow commissions to be rolled into the financed amount). So all things being equal, most buyers will opt to keep the cash in their pocket and pay an extra 3%/month.

As far as why the difference between countries, property transfer processes vary wildly. But the crux of your question was the main point of the litigation—it’s because NAR basically controlled that market for decades.

The result of this litigation is a big win for consumers, but nobody knows how it will all shake out. There are a number of existing structural things in the industry that will need to change too.

[Erikg]

It is a weird settlement. I can't help but think the tech industry are the biggest winners here. I believe Redfin charges a 1% fee to the seller to list on Redfin and requires 3% to go to buyers agent, this buyers fee will soon be gone.

Agents will re-coupe lost income from the buying side of their practice by pushing any costs to owners (i.e. for home staging and such), however, in the end it's going to be big tech that allows the easiest, cheapest transactions to occur. this settlement kind of opens the door for them.