12/06/2023
Every person knows a real estate agent or has known one.
This is an industry that has brought livelihood and small business ownership to millions and millions of people in the United States.
If you aren’t aware, a jury found the National Association of Realtors and two brokerage firms were liable for $1.8 billion in damages for conspiring to keep commissions artificially high.
I have been listening to some experts who are saying that to get injunctive relief until NAR can appeal the verdict, they MIGHT require listing agents not to actually put into their contract that they are paying out a buyer agent commission. Meaning buyer agents will no longer get paid by the sellers. This could happen in the next few months.
The ramifications of this are serious for those buying a home, selling a home, and one of the largest industries of small business owners in the whole country.
The ramifications are that, yes, sellers will pay less commission (good for sellers).
However many buyers will not have buyer agents working for them unless they choose to pay them on top of what they are already paying for the house. And keep in mind that the additional amount they are paying cannot be rolled into their mortgage. So that is a cash outlay above and beyond their down payment… which many people cannot afford (bad for buyers).
And so if you already have a cash-strapped buyer, they will go to the listing agent and not have any representation at all because the listing agent represents the sellers. So again, the buyers might end up paying more for a home because they are not being helped by a real estate agent (again bad for buyers).
The downside for agents is that there might be less business because they don't know how to get the buyers to pay them a commission. However, that is supply and demand and part of being a small business owner. It will work itself out.
So while this looks like a win for the consumers... it's actually a huge loss for buyers (who are also consumers) as it will cost more for them to be represented or they will not be represented and could overpay for a home because they are not being provided information about the current market values.
I do believe that the affluent will still pay for a buyer's agent, and those buyers just struggling to get by won't be able to.
So again, homeownership looks like a distant dream for many lower-income homebuyers.
The unintended consequences of this judgment will be felt by millions of people.
However, it's the low-income individuals who will face the worst consequences.
