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The Headlines Are Not the Full Story!

Posted by Jason Cummings | Mar 18, 2024 | 0 Comments

By now, you've seen the headlines, heard it on the news, or read the articles about the monumental ruling and subsequent settlement agreement by The National Association of Realtors. 

Realtors are a valuable and integral part of the real estate industry. Unfortunately, the headlines and an apparent lack of understanding of the industry are misrepresenting the ruling.
Commissions are and always have been negotiable. Somewhere along the way, that message was lost, creating a false understanding of how commissions are paid and by how much. The consumer should negotiate the commissions to be paid by the seller or the buyer and put them in writing in the form of an agency agreement. 

The ruling does not prohibit the seller from paying the buyer's broker commission. It does remove the offers of compensation in the multi-list system. 

The speculation that there will be a drastic drop in home prices because the seller is potentially paying less commission is categorically false and misleading. The commission the seller paid has never dictated a home's valuation. The market dictates home prices and what someone is willing to pay for the property, not the commission paid by the seller. If a home's value is $400,000 and the seller negotiates the commission to be 4% from the mischaracterized standard of 6%, the savings equates to $8,000. If the property's fair market value is $400,0000, it's unrealistic to think the seller will reduce the price by the amount of commission saved and sell for less than its value. They will and should want to retain that savings in their net proceeds. The buyers will be most affected as they may need to start paying their agent's commission, which could diminish their buying power and potentially negatively impact home sales. We could also begin seeing buyers purchase without representation and someone looking out for their best interests. But that's another rabbit hole we can go down at another time.

This ruling isn't as doom-and-gloom as the media has made it sound. In fact, some potentially significant benefits will arise, such as increased transparency, agency use, and competition among agents, resulting in better commission breaks for sellers and buyers. 

It's far too early to clearly understand how these rules will affect things. However, as we move forward in the coming weeks and months, things will begin to come into focus.

About the Author

Jason Cummings

[email protected] | Director of Business Development


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