Questions about Home Prices and Commissions

WHAT IS THE NAR RULING?

If you’ve been considering buying or selling a house recently, you’ve probably heard about the federal ruling that found that The National Association of Realtors (NAR) has been artificially setting commission rates, which the jury found tantamount to price fixing. Though commissions have always been negotiable, many transactions in the local market include variable seller agent commissions, which are then, in turn, split with the buyer agents. The NAR ruling means that commissions for listing and seller agents will be uncoupled, meaning that buyers will be on the hook for paying the agents who work for them.

Of course, the internet, print media, and thousands of American realty offices have been abuzz about the verdict, wondering if it will be overturned and thinking about the ways it could affect how Americans buy and sell properties.

*Agent Amy Pulliam touring land with clients*

At Boro Realty, where our full-time agents have many decades of experience here in North Carolina, we’re not too worried, though we are concerned for first-time buyers (see below). Our clients, many of whom we’ve represented for multiple sales and purchases, know exactly what we do and how hard we work. They know we take our fiduciary vow to them seriously, always putting our client’s financial interests before our own. Still, we’ve been mulling over the NAR ruling, and we welcome changes that make transactions more transparent and, frankly, that reward us for what sometimes can add up to many, many hours of unpaid work.

FIVE WAYS THE NAR RULING WILL (OR WON’T) AFFECT REALTY IN THE U.S.

1. SELLERS WILL WIN

From a seller's standpoint, this ruling is a win, mostly. Unbundling the buyer’s agent fee from the fees that a seller pays at closing would cut most commissions in half, and that doesn’t account for any negotiating of the commission rate itself. If, however, a seller doesn’t offer any finding fee or commission at all, the competition for their property could be minimized, bringing more inexperienced buyers who may be representing themselves without an agent. This is not a great scenario for any seller. Deals can become chaotic and fall apart, and when you’re trying to sell, time is money.

That said, if sellers’ costs decrease, more houses could come on the market. Some homeowners might be more likely to sell, knowing that they’ll get to keep more of the proceeds.

2. BUYERS WILL FIND A WAY

This is where we, at Boro, become concerned for our North Carolina neighbors. In the U.S. purchasing a home is the main way families build intergenerational wealth. Being left out of the property market, then, can have lasting effects. Asking first-time buyers to find funds to cover the inspections, down payment, closing costs, moving expenses, and sales fees will certainly leave some people behind, which doesn’t sit right with us. At all. The current system, though flawed, has made home ownership available to more people, offering them real stability.

We know, though, that the real estate market will find ways to invite responsible buyers to participate. Again, this could mean that they have to pay their agents hourly for services they select off a menu of sorts–from fees for showing houses, arranging inspections, and writing up offers, for example. As we mentioned above, lenders may find a way to wrap these fees into mortgages, which would certainly allow more people to enter the housing market.

Still, first-time buyers may indeed decide to fend for themselves. From experience, though, we know it’s a mistake to approach the biggest purchase of a lifetime without an experienced agent. As realtors, we’ve saved clients from countless money-trap messes and poor investments. In the end, we worry that buyers will not know enough to protect themselves, and they will end up losing more money than they’d have paid for a quality real estate agent in the first place. Not good.

*Assisting buyers with water management plans*

3. PROFESSIONAL REALTORS WILL EARN FAIR PAY

For realtors, this ruling is an invitation for more transparency and clear communication about the work we do and the fees we charge. Right now, as buyers’ agents, nothing we do is ala carte–we do it all, no matter if our client actually purchases a property or not, and we are only compensated after an actual sale. No one knows for sure what the future will look like, but we’re confident that experienced, full-time realtors won’t be working for free.

When representing a buyer, realtors work evenings, weekends, and even holidays, helping folks understand a property–its neighborhood, and its municipality–to make sure it’s a good fit. We’ve shown upwards of 20 homes to a single client, and that’s before we do the work of actually helping them buy a property.

As Buyer’s Agents, we help our clients:

understand the entire home buying process and timeline
determine if the asking price is reasonable
see past the staging
secure a trustworthy and thorough inspection
appreciate the consequences of that inspection in terms of both time and money
advise clients on competitive and smart offer terms
write up offers
negotiate repairs
advocate for our clients during closing
Clearly, no matter what happens with the NAR ruling, buyers’ agents will still get paid. Cooperative commissions could be replaced by smaller finder’s fees that seller agents pay to buyer agents, along with hourly or a la carte service fees that buyers will need to cover, even if it ends up being part of their mortgage. All of this could vary by realtor, and consumers will need to find realtors who meet their needs.

Owner/agent Blair Nell writing an offer while on vacation

4. HOME PRICES WILL NOT BE AFFECTED

We’ve heard that some folks think the NAR ruling will drop property prices, but we know that prices aren’t determined by sales commissions. Professional realtors help their clients set prices based on comparable sales and they advise their clients to make reasonable offers accordingly. Appraisals also use comparable sales to support contract prices and never take an agent’s commission into consideration. Even if the NAR ruling does encourage more folks to sell their properties, it won’t be enough to drive prices down in the face of high demand.

5. THE MARKET WILL DO WHAT THE MARKET HAS ALWAYS DONE

It’s the same old story. Supply and demand. Lately, for many years actually, there’s been a dearth of supply and a glut of demand. So many people vying for one property, with offers way over asking. Here in North Carolina, that’s not going to change very much. In the Triangle, specifically, there will always be people looking for homes, thanks to all of the universities and colleges, technology companies, and research organizations. In our mind, the realty sales commission (and who pays it) doesn’t matter a whit to our local market. Again, even if the NAR ruling inspires a few more people to sell, there are always so many newcomers looking to set down roots here. It’s a great place to live, and word has definitely gotten out.

GET IN TOUCH

Have more questions about the NAR ruling? Curious about Boro Realty’s commission structure? Thinking about buying or selling? We’re realtors! We love to talk about this stuff.