NAR Settlement: Facts Vs Fake News, DEBUNKED!

Dated: March 19 2024

Views: 879

BY JADE GOODHUE

 

There’s been a lot of buzz about the National Association of Realtors (NAR) ‘settlement.’ And quite frankly it’s been shocking to see so much fake news coming from some of our biggest news outlets, and even my favorites. First and foremost, the NAR has NOT yet settled nor have they admitted to any wrongdoing. What they’ve agreed to do is make certain changes. 

 

As of now, nothing will change until the courts approve a settlement. The news outlets are reporting on the proposal that’s currently on the table by the NAR, but it has not yet been agreed upon. What this proposed settlement actually does is it decouples the buyer agent commission from an automatic offer of compensation in the MLS where it will be prohibited in the future, but it’s just a proposal. Once a settlement agreement is reached, it has to be approved by the court.

 

That being said, here are some of the most common fake headlines and posts debunked. 

 

Is It the End of a 5-6% Standard Commission?

 

The headline in and of itself is fake news. There is no industry standard. The commission has ALWAYS been negotiable. At Legendary Real Estate Services, we’ve negotiated anywhere from 4-6%. Moreover, there are discount brokerages and flat-rate fee brokerage services available to anyone. Finally, every consumer has the right to list their home for sale by owner (FSBO). In 2022, FSBOs accounted for a little over 10% of all home sales nationwide. Thus, Realtor© ‘standard’ commissions aren’t changing, rather we’ll change how we communicate with consumers about it because there is no standard.

Will the Proposed Settlement Lower Home Prices?

 

FAKE! Home prices are a function of supply and demand, not Realtor© commissions. The Housing Crisis of 2008 decimated homebuilders. It’s taken nearly a decade for some of them to recover, and they still aren’t at full strength. As you can see from the graph below, we’ve been running at a deficit since then to the tune of over 3 million housing units. When supply goes down and demand is hot, what happens to price? IT GOES UP! Sellers will always want as much money as their home can sell for in a consumer-driven marketplace.

 

Source: Axios

 

Moreover, a real estate brokerage is like any retailer; we source a product, and then we broker a deal directly with the consumer for that product for a profit. Based on the quality of the products and the additional value and service that retailers provide, some retailers charge more, and some charge less. At the end of the day, you generally get what you pay for. The real estate brokerage industry is no different. 

 

Lastly, if we’re really worried about home prices, maybe we shouldn’t have allowed our officials to raise the impact fees for new construction of single-family homes in Lake Geneva by nearly $10K. Doug Wheaton, governmental affairs liaison for the Lakes Area Realtors Association, said he is concerned that increasing the impact fees will cause fewer homes to be built in the City of Lake Geneva. “Given the magnitude of these proposed fee increases, it almost seems like the goal is to make it as hard as possible for someone to build a home,” Wheaton said. “People who live in new homes typically pay a lot of money in property taxes. If the city imposes huge, new fees that further reduce home construction. Property taxes that otherwise would be paid by people living in new homes will instead have to be paid by people living in existing homes within the city.”

Will Changes to the MLS End “Steering”?

 

FAKE on so many levels! First, the MLS is a platform that enables universal compensation which reduces discrimination because it promotes public disclosure. Meaning, that no matter what brokerage you are from or who your client is, the compensation is transparent, known in advance, and the same for everyone. If this settlement passes as is, if a listing agency wants to block a competing brokerage or buyer, all they have to do is offer a lower commission structure that would force buyers to have to pay even more out of pocket to compensate their agent because that agent’s fee has already been negotiated in advance per the buyer agency agreement. Thus, it also discourages buyer representation.

 

Moreover, there aren’t enough homes to go around to steer! The most in-demand homes in the Geneva Lakes are between the $200K-$400K price range, and when one comes up, we’re all falling over ourselves trying to get our buyer to see it as quickly as possible. The last thing we’re looking at is how much the co-broker commission is because we just want to serve our clients. 

 

Finally, with the amount of data at our fingertips via Zillow, Trulia, Redfin, or Realtor.com, how can we possibly ‘hide’ homes from buyers that have ‘lower’ co-broke commissions? I have buyers sending me listings from one of those sites late at night asking me to see it. Hence, I call BS. I’m sorry Department of Justice, but the 1980’s called and they want their argument back. 

 

Other Countries Pay Less Housing Commission

 

FACT! Real estate commissions in the US are often higher than in other countries due to several factors. The commission rates in the US often include fees for both the buyer's and seller's agents, whereas, in some other countries, there is no buyer representation so buyers are on their own. Thus, the seller is only paying one side. In fact, many countries are trying to westernize their system because theirs isn’t working. As it stands, the real estate industry in the United States of America is the gold standard of where other countries would like to be.  

 

Furthermore, the US real estate market has a tradition of offering higher commissions as an incentive for agents to work diligently on behalf of their clients. A buyer’s agent can work for months with a buyer and not get paid. They are incentivized by the fact that if and when a transaction closes, they’ll get paid a fee. But there’s no guarantee the buyer will actually buy. What if after 30 showings, the buyer decides to rent? Thus, the fees are structured the way they are to compensate for the risk they’re taking on. In any industry, the higher the risk, the more it should cost you. These factors contribute to the relatively higher real estate commissions in the US compared to other countries.

Bottom Line

 

The real estate industry is changing, but it hasn’t yet, and it won’t be by that much. 

 

To buyers: You deserve representation as much as a seller does. Especially if you’re a first-time home buyer or haven’t sold a home in a while. Contracts have changed, real estate laws have changed, the market has changed, and homes have changed. 

 

Are you 100% sure you want to navigate all of that while juggling your current level of responsibilities? The same questions can be asked of sellers too. There’s no wrong answer, just the right one for you.

 

To sellers: If you think you want to sell your home FSBO and save on Realtor© fees, it has been and always will be your right. If you want a discount broker, you’re free to find them. If you want to negotiate fees, we’ve been open to it this whole time. But like anything else, you get what you pay for. Between putting deals together, navigating contingencies, problem-solving, negotiations, and keeping deals from falling apart, many clients are happy to pay us what we’re worth and also thank us for it. 

Whether you want a full-service brokerage or a limited-service brokerage, or to negotiate fees for fewer services, we provide you with those options so you can feel comfortable you’re getting the services you want at a price we both can agree on.

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Chris Devincentis & Jade Goodhue

Jade and Chris co-founded Legendary Real Estates Services during the start of the 2020 pandemic. With Chris’s background as a real estate agent and broker since 1990, and Jade’s background....

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