Special Report: Real change may be coming to real estate: How will commission shifts affect you?
'The issues we have with home prices are not the prices -- it’s the lack of inventory.'
BEND, Ore. (KTVZ) -- A recent proposed Realtor lawsuit settlement that would change commission rules for real estate agents could have some serious impacts on the housing market and real estate industry, here on the High Desert and elsewhere. Just how is still coming into focus.
Central Oregon real estate agent Austin Buskohl said, “There's still a lot of uncertainty, but if the settlement gets agreed upon, the seller now has the ability to say, 'No, we don’t want to offer any commission to the buyer's agent.' And so now that cost will get put on to the buyer, potentially out of pocket, at the closing table, in order to purchase their home to pay for their cost of using an agent.”
If that becomes the case, it’s an added barrier for potential and first-time homebuyers, atop a lack of inventory and high interest rates that already contribute to the challenge.
Mortgage broker Aaron Callahan, the Owner of Hilltop Home Loans in Bend, shared his take on the matter, when asked whether or not the National Association of Realtors commission guideline change would result in lower home sale prices.
"I would say, leaning towards no, because the issues we have with home prices are not the prices -- it’s the lack of inventory," Callahan said.
Buskohl shared that even if prices were to drop, it would be short-lived.
"If home prices do go down, then you’ll probably see buyers start to bid home prices up, which then also impacts what they will pay their buyer's agent.”
From a seller's perspective, Buskohl said they may be unwilling to reduce their price if, for example, they see their neighbor is successful in selling their home at the amount they want. Sellers may also want to pocket the money for the purchase of their next home.
Based on the many conversations going on about the NAR commission guidelines, Callahan points out a misconception about the potential rule.
"It's been really poorly worded for years, where sellers were paying for the buyer's agents commissions. That was never really the case," Callahan said. "Buyer's agents commission is paid out of the transactions. Some of the misnomer floating around out there is that suddenly buyer's agents just don’t need to be paid, or buyers need to compensate the buyer’s agent completely, and that’s never been the case. In fact, the ruling didn’t even say that, it just said it can't be listed on the MLS (Multiple Listing Service)."
Without buyer's agents commissions listed on the MLS, real estate agent Alexandria Bolden explains what kind of dialogue would take place.
"What they’re talking about moving forward is, say I’m representing a buyer, I would call the listing agent and say 'Hey, are you going to be providing any sort of buyer-agent commission?' They'll say yes or no, they’ll tell me what they already discussed with their seller," Bolden said.
From there, Bolden said, the discussion with the buyer would cover the purchase offer, home inspection contingencies, closing date, closing costs and more, ultimately offering a lot more transparency.
Buyers will also be required to sign buyer representation agreements to use an agent, which is a legally binding agreement detailing services, agency relationship, and compensation.
"It’s going to really encourage agents to sit down with their buyers, explain the process start to finish of how to purchase a home with that particular agent, how that particular agent is going to get paid," Bolden said.
