The recent National Association of Realtors (NAR) lawsuit settlement has created uncertainty within the real estate industry. While some experts have made predictions about the future impact, there are still many unanswered questions and practical matters that need to be addressed before the true effects are known.
It is important to note that the court decision leading to the settlement could still be overturned. While the NAR and some defendants settled with the plaintiffs, others are continuing to appeal the decision. This means that it may take some time before any practical changes occur in the real estate marketplace.
Another factor to consider is what would happen if the non-settling defendants prevail on appeal. The NAR settlement would still be valid, but it would be based on a court decision that is no longer valid.
The fundamental premise of the lawsuit was that if sellers and buyers each paid their own commissions, overall commissions would decrease and result in lower property prices. While this may seem plausible on the surface, a deeper look into the realities of the real estate business suggests otherwise.
Despite the NAR settlement, it is unlikely that the real estate industry will undergo dramatic changes in the next six months to a year. The fundamental factors that drive the market, such as sellers needing to sell and buyers needing to buy, will remain the same. Real estate agents, who have always negotiated their fees, will continue to work towards facilitating the buying and selling process.
Under the settlement, sellers will have to pay lower sales commissions. However, buyers are likely to resist paying their own commissions due to budget constraints. Mortgage lenders are currently unable to include the cost of a buyer’s commission in loan fees or the loan itself. Until this changes, there will be pressure to include the commission expense in the price of the house.
One potential solution for buyers is to sign commission agreements with agents as per the NAR settlement and make it a condition of their purchase offer to have the seller cover the buyer’s commission obligation.
It is highly unlikely that real estate agents will receive lower fees as a result of the commission-shift from seller to buyer. While there is a perception that agents make a lot of money, the reality is that the majority of agents struggle to earn a living. Some agents may be willing to work for less, but it is important to remember that you get what you pay for. In these changing times, upgrading one’s skills is crucial for success in the industry.
Ultimately, the amount of agent commissions to be paid by buyers and sellers should be decided by the marketplace, not the courts or government entities. Negotiating the total commission amount has always been possible based on market forces. It is likely that this will continue to be the case. Only time will tell the true effects of the NAR lawsuit and how commissions will be affected in the future.
