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National Association of Realtors Announces Settlement Agreement Class action plaintiffs in Sitzer | Burnett case awaits final court approval earlier this month.
The basis for the lawsuit is rooted in the most common way residential real estate transactions are done in the country, in which a seller hires an attorney to represent his or her interests at a professional fee and then provides compensation to the attorney who represents the buyer. Incentives to sell your home.
Since the settlement was announced, numerous articles and stories have appeared online media What this means for buyers and sellers. Unfortunately, most consumer-facing media coverage reflects a severe lack of understanding of the real estate industry and misrepresentations.
Below, I’ll review several of the points the media makes to consumers and debunk some of the myths.
1. Settlement agreement forces real estate agents to reduce compensation.Incorrect
The settlement agreement in no way sets any standards or limits on what real estate agents can charge or the services they choose to provide. Real estate agent fees are always negotiable. Real estate agents can work together on deals toward a common goal, but can be fiercely independent and competitive with each other.
In every market, you’ll find real estate agents in just about every price range, and with varying degrees of service and capabilities.
Now, people compare costs in the United States to some other countries, but in many of the countries mentioned, real estate professionals are employees with benefits, usually salary and bonuses. The vast majority of real estate professionals in the United States are paid 100% for performance through commissions.
2. The settlement agreement will prohibit the seller from paying a commission to the buyer’s agent.Incorrect
The decision to pay a buyer’s agent is entirely up to the seller and nothing changes in terms of options. Many of us believe that the most important outcome is a successful sale of the property on the seller’s terms, and maximizing incentives for a buyer’s agent to show and sell the home is the best way to achieve their goals.
3. The settlement will now relieve the seller of any financial burden incurred by the buyer’s agent fees.Incorrect
Although sellers can choose not to pay any fees Buyer’s Agent Compensation, which does not mean they will shy away from the economy. Buyers can easily write contingencies into any offer, require the seller to cover costs, or can ask for other concessions such as cost assistance in the amount they pay their representative.
4. The settlement ultimately reduces the overall cost of closing services because the seller will no longer be paying the buyer’s agent.Incorrect
If a seller now chooses to only compensate the listing agent, it simply means that the buyer, not the seller, will now have to pay their own agent’s fees if they don’t require the seller to pay a contract contingency.
Real estate agent services are not free, nor should they be. Just because two parties can now share the cost of services instead of one does not mean that the total cost of the transaction has been reduced.
5. The settlement will help lower real estate prices and make homes affordable again.Incorrect
The general value of real estate is determined by supply and demand fundamentals, not by real estate agents. Yes, commissions represent closing costs, but they also include title fees, closing costs, mortgage-related fees, property taxes, association fees, and more.
In theory, if real estate commissions were reduced by 1% due to compression, a $500,000 home would now cost only $495,000 — virtually no difference to whether anyone could afford the home.
The real reason home ownership is becoming increasingly unaffordable is that the values of homes in our market have risen dramatically in recent years.
6. The settlement is a huge win for the buyers, who can now negotiate agent fees.very doubtful
For those of you who have purchased one or more homes over the years, you are most likely happy to have the seller compensate your agent so you don’t have to.
For buyers who must raise enough money to cover a down payment and closing costs, having the commission paid by the seller and built into the price of the home allows the buyer to raise the money over time instead of shelling out thousands more. Dollar. closure.
The reality is that most mortgages end up being sold to Fannie Mae and Freddie Mac, and neither offers terms for commission financing.
In fact, the Department of Veterans Affairs (VA) loan program specifically prohibits borrowers from paying any kind of commission on a real estate transaction. So how is a veteran who served his country honorably now better off without representation?
7. The settlement will result in substantial compensation for real estate consumers who have been “harmed” by real estate agents in recent years.Incorrect
The settlement amount is large, but dividing that amount by the number of potentially eligible consumers works out to about $10 per person, depending on how many sellers actually file a claim. The only people who really benefited were the class-action lawyers, who filed requests with the court for more than $80 million in legal fees.
As a real estate professional for over 40 years, I have worked with thousands of real estate agents who make what may be their largest investments on behalf of the public. I’ll be the first to admit that the industry would be better off without some professionals, but they are the minority.
What I keep witnessing is incredibly hard work and countless situations where an agent oversteps the bounds to do something he or she shouldn’t and pays the price. Manage complex transactions, calm emotions, and build relationships based on trust and care to help buyers realize their dreams and sellers maximize returns. Sometimes, they even serve as housekeepers, janitors, repairmen, and countless other roles, always with sellers and buyers as their primary focus. I’m proud to work with them every day and the public’s lives are better because of them.
Whenever circumstances change, the brokerage community always adapts when necessary to best represent buyers and sellers in real estate sales. No doubt it will do so again. In the meantime, the parsing of truth and fiction should be expected of all as they come to their own conclusions.
Budge Huskey is President and CEO of Premier Sotheby’s International Realty.Follow him Instagram and LinkedIn.
