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Post by the Scribe on Mar 23, 2024 16:52:43 GMT
 3 tips for homebuyers to navigate the new era of commissions
www.yahoo.com/finance/news/3-tips-for-homebuyers-to-navigate-the-new-era-of-commissions-134132670.html
Experts give advice in the wake of a legal settlement that is reshaping how real estate agents are paid.
Rebecca Chen·Reporter
Sat, March 23, 2024 at 6:41 AM MST·5 min read 43
Homebuyers suddenly face uncharted territory in the wake of a Realtor settlement that dismantles the way agent commissions are paid. On one hand, buyers could face more financial hurdles on top of exorbitant financing costs and elevated home prices. On the other hand, they stand to gain greater price transparency and negotiating power as the new norm rolls out.
www.yahoo.com/finance/news/realtor-lawsuit-settlement-unburdens-home-sellers-from-heavy-commissions-what-now-for-buyers-090010199.html
Last week, the National Association of Realtors agreed to a settlement, which is subject to approval by a federal judge, that would eliminate the standard 6% commission paid by sellers and shift some of that responsibility to buyers.
We spoke with industry experts about the ramifications for homebuyers. Here are their tips to navigate the process and come out ahead.
Read more: How to sell your house without a Realtor
www.yahoo.com/finance/personal-finance/how-to-sell-your-house-without-a-realtor-190457629.html
Tip #1: Shop for suitable agents
First step: Compare shops and hire an agent who delivers true value.
You should take a hard look at your personal needs, budget, and knowledge of the homebuying process. First-time buyers may need a hands-on agent who can walk them through the entire buying process, while seasoned buyers who have bought and sold multiple homes don’t necessarily need that comprehensive service.
www.yahoo.com/finance/personal-finance/first-time-home-buyer-195246478.html
"If you are a first-time homebuyer and you don't know anything about what's going on or what is special about each neighborhood, it's easier to get help," Lei Wedge, an associate professor in investments and real estate at the University of South Florida, told Yahoo Finance.
Look for an agent who offers the elements that can help you find the right home: a local neighborhood expert if you are moving to a new city, a financing guru if you have limited cash, or a strong negotiator if you want a good deal. Maybe even all three.
"Research and interview potential agents," Stephen Brobeck, a senior fellow at the Consumer Federation of America, told Yahoo Finance.
This has always been a best practice — the difference now is you’ll need to determine how and how much to pay because home sellers are no longer picking up the tab automatically.
Agents may get creative with fees — with some negotiating their compensation as part of sellers' concessions or embedding their fee in your mortgage payment — methods that homebuyers need to agree to before signing with an agent.
"Don't sign a contract until you are satisfied," Brobeck said. "And if you're not satisfied after discussing and doing your own research, go to another agent."
A new housing development in Middlesex Township, Pa., is shown on Oct. 12, 2022. The cost of hiring a real estate agent to buy or sell a home is poised to change along with decades-old rules that have helped determine broker commissions. (AP Photo/Gene J. Puskar, File) (ASSOCIATED PRESS)
Tip #2: Utilize limited services or 'a la carte' options
Instead of hiring a full-service agent who manages every step of the purchase process, find someone who offers reduced service by stepping in after you have found your home. That means you would take on the early work — such as researching neighborhoods and scheduling home-viewing appointments — and leave the technical aspects to hired professionals to close the deal.
"That would provide more flexibility and potentially a lot lower costs," Steven Nicastro, Realtor and project team lead at Clever Real Estate, a discounted online brokerage, told Yahoo Finance.
If partial service agents are still too costly, opt for 'a la carte' assistance — an option that experts said will become more popular. This means picking from a menu of services like home valuation, preliminary inspection, or contract drafting.
"You can go to the internet, find your home, call the listing agent, see the homes yourself,” Wedge said, “and when you need to make an offer, hire an agent charging $500 to write a contract for you."
If you don’t know how to negotiate a home purchase — and most people probably don’t — ‘a la carte’ provides the option to hire an agent to do just that. They would take charge of getting you benefits like closing cost concessions, earlier moving dates, and repair credits.
"[Negotiation] is like science," Nicastro said. "If you are a buyer's agent and have done lots of deals, you know how to negotiate. You know how willing the sellers are to negotiate based on discussion with the listing agent and how long the house has been on the market."
You could also purchase access to the Multiple Listing Service (MLS), the Realtor association’s private database tracking for-sale homes that is created and maintained by professionals. This platform contains exclusive and first-hand information not available on mainstream listing sites such as Zillow. Before making an offer, you can compile a competitive market analysis on the MLS, giving you a leg up during the buying process.
listwithclever.com/real-estate-blog/comparative-market-analysis-real-estate/#what-is-a-cma
People walk past the National Association of Realtors building at 430 N. Michigan Ave. in Chicago on Sept. 20, 2023. (Antonio Perez/Chicago Tribune/Tribune News Service via Getty Images) (Chicago Tribune via Getty Images)
Tip #3: Negotiate for reduced agent fees
The biggest edge buyers gained from the settlement: negotiating power. Haggle for lower commissions or smaller fees that match the value of services rendered.
You can leverage the discussion based on how much time the agent would spend helping you buy the home.
"Sometimes some buyers shop around for a weekend, and they find a home they like, and they make an offer,” Wedge said. “In such cases, buyers should negotiate for lower fees because this is not much work for the agents, so it's not fair for the agents to get paid 3%."
You can also offer a lower commission on a more expensive home that still guarantees a good payout.
"If [someone] is buying a $2 million home, [agents] can get 1% because that would still be $20,000. That’s enough money,” Wedge said.
Lastly, your mental and financial readiness should factor into the 'right' price to compensate your agent.
"You could have someone who wants to see a ton of houses and just doesn't know what they want yet, that makes it really challenging for it to be worth an agent's time," Nicastro said. "Versus someone who's ready to go and pre-approved, knows the exact type of house they want to buy. So those are two different scenarios."
In non-extreme cases, Clever's CEO is predicting most deals will settle at a 1.5% to 2% commission for buyers' agents.
Rebecca Chen is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).
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Post by the Scribe on Mar 23, 2024 17:45:37 GMT
comments
Before 1992, homebuyers went to the one agent handling both sides of a transaction. They were never fully apprised of the fact that the agent was essentially working for the seller. But then, bingo: the government stepped in and said now both sides of the transaction needed to have their own agent in order to equally informed about the market, equally represented, and to eliminate the obvious conflict of interest. Back then, the listing agent kept the commission but as things moved forward was required to share that commission with the buyers representative. But then the government decided that was not OK, so bingo: the government has reversed its earlier opinion and we are back to collusion and conflict of interest because the reality is that home buyers are not going to come up with a fee that they can afford to find a competent buyer representative and they will go directly to the listing agent -and we are back to the 1980s.
Know your home's value for the market and then contact several home buyer investors for a bid. No fuss, no muss and they take care of everything and can often close in days. They may even allow you to stay in the property for a short while or even rent back to you. If you are buying and require a mortgage then get qualified with a letter from a lender and start looking on your own. More and more I am hearing of real estate sales people doing the home purchase paperwork for a FLAT FEE of $1000. Real estate sales people and realtors have all sorts of tricks to benefit themselves. Most want a quick sale and will undervalue your home by saying such things as "it needs updating" or " needs a lot of work." Often it doesn't depending on the market you are in. They want a quick sale without doing all the work one would expect of them and that avoids it all at YOUR expense. There are also home seller kits that will guide you through if all. Look up FSBO (for sale by owner). Educating yourself first may save you a lot of money. Just be honest about any substantial flaws in the property to avoid problems later. That may be where a home inspector could come in handy.
A revolution is coming to real estate industry. Throughout history, technology makes transactions more efficient and reduces transaction cost. Think about stock transaction cost, we used to call a broker to buy stocks and pay commission based on the transaction amount, now technology allow us to do it on our phone instantly with zero commission. Think about international shipping, it used to take months to send a messages and products by people riding on a horse or a sail boat. Now we can email an order and ship them on giant container in just a week across oceans at a lower cost due to technology.
Real estate is the ONLY industry where transaction cost is NOT REDUCED by technology. In fact, as technology becomes more advanced, Transaction cost still gets higher because it is based on the price of the home, not based on how much effort it is to sell a house. Now does that make sense? We pay shipping / freight cost based on the weight of the product, so the heavier and bulkier product takes more effort to move and cost more to ship. Imagine if Freight cost is based on the price of the product, then shipping cost will be higher to ship an iPhone than to ship a whole pallet load of sports drinks. Real estate transaction/ commission cost should be based on how much effort it takes to sell. Maybe bill customers by the hours like the lawyers or by services actually provided. And customers who close a deal fast should not have to subsidize the the ones who require more time.
This is not going to benefit home buyers at all! Sellers will continue to price to sale high and keep the from paying out the buyers commission. In California ,sellers always negotiate commissions and since 2014 the norm is a standard 4 % total . In this sellers market many sellers are stubborn ,under the impression their home is worth more than gold. This new decision is not going to benefit anybody. Sellers are still going to demand a high price for their home and not take the buyer less commission into consideration. Buyers will suffer because they will not receive the service they require. Many realtors will drop out of the business because it is simply not worth staying in business and paying all the marketing overhead and membership fees. Its going to be a mess!
I suspect the vast majority of potential homebuyers are searching sites like Zillow, Realtor.com, Redfin, and the like. They ALL have the listing agent's contact info so I can't imagine why buyers need to have an agent to show them properties any longer. It USED to be, before the internet and the sites mentioned, that buyers were STUCK depending on an agent with access to the MLS but those days are GONE. No need for buyers' agents at this point.
Not sure anyone cares, but I was first licensed in R.E. in 1978 and still maintain a license today. Although I don't look for business anymore and actually avoid it, i like keeping my license mainly for my own activity.
To address this recent turmoil, this is nothing new to the industry. Yes, I started when the Seller was everything and it was Buyer beware. Over the years it has done a complete 180. I might remind those who want to know facts, that the commission (will address this in a next post) paid by a Seller which allows for compensation to the Buyer's agent/representative allows for lower down payments. Appraisals have never added or subtracted commissions from recent sales as comparables to establish that value. The Seller typically has the equity to provide for that assistance, and I fear the removal of this practice will destroy first time homebuyer's ability to buy, even more. One example and proof of this, just look back to 2008 during the housing bust when no equity was there and the banks were the sellers.
Speaking about commissions. This will appear out of order since I wrote about the recent changes that appear below this post. I've always said everyone needs to experience trying to make a living in Real Estate sales. Unless you've made a living this way, you never have experienced spending months worth of time with someone who will just drop you and do business with another agent who has spent almost no time with them leaving you with nothing. It would be great if there was a way to get paid for all the time spent rather than just getting rewarded when a closing finally is accomplished. I've tried Buyer commission agreements, however, the ones I tried never worked out and Buyers just ignore the agreement they signed. No one wants to go to court to get payment. Another common irritating occurrence is calls for assistance and information without compensation. Realtors don't like to be rude and not help, hoping the person will eventually do business with them, but in the end the percentage of the information seekers again use someone who did nothing. Any commission is way too high, basically we get rewarded to make up for those who leave us high and dry. Actually, I am really glad I don't have to make my living that way anymore and I've seen a decline in the morality of Realtors and Lenders alike. I do like to think back to times long ago when respect was common among agents. Used to get calls from agents to tell me my customer is interested. That's long gone.
1. If the risk to the agent is the same, I'm not taking $500. Find someone who will. that's fine. (Risks such as steering, block busting, or violating any of the other laws that agents are scrutinized for. Even an ad mentioning the "wrong" words can be a source of fines - and rightly so - but those risks are real.)
2. Once again, the article mentions agents throughout but the commissions do not fully go to agents. not even close. 6 percent is split among the BROKERS. The resulting 3 percent is split between that Broker and the agent. Further, the agent pays fees, insurance, required membership dues in various realty associations.
3. Those above mentioned associations have been curiously silent so far in defending agents - despite the mandatory dues paid to them.
4. Consumers have not been told the many value added things that an agent do for both buyers and sellers. Helping consumers target the homes they want and can afford, and helping sellers stage and market their homes.
Go ahead and join the race to the bottom. Agents will be happy to help when consumers realize what they have given up in the interest of saving half a percent.
As a seller I would not want people going thru my home without an agent, and why should the selling agent do all the work for the buyer (unless they agree to work as both agents). This is going to be horrible.. Another door opening for scams..
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