B4 • Friday, December 6, 2024
thegardenisland.com
THE GARDEN ISLAND
What commission changes mean for homebuyers, sellers Jeff Ostrowski BANKRATE.COM The National Association of Realtors (NAR) agreed to new rules around real estate commissions as part of a lawsuit settlement in March. As of August 17, they’re actually rolling out — and consumers face a deluge of confusion and conflicting predictions. One narrative predicts a coming utopia for homebuyers: A price war will erupt, and commissions will plunge amid a new wave of competition among buyers’ agents. A competing narrative goes in the opposite direction: Under the new commission structure, buyers will realize they’re on the hook for thousands and decide not to use agents at all. NAR, meanwhile, has portrayed the changes as minor tweaks rather than a major shift. The opposing narratives underscore just how complex Realtor compensation has always been — and how much more complex it just got. Here’s a look at the new commission structure and what it could mean for both homebuyers and sellers. How real estate commissions used to work Traditionally, when a home seller hired a real estate agent to represent their listing, the seller agreed to pay a commission. The national average has been about 5% of the home’s sale price, typically split down the middle with 2.5% going to the listing agent and the other 2.5% to the buyer’s agent. (On a $400,000 home, 5% comes to $20,000, or $10,000 for each agent.)
Rocket Mortgage sues feds over discrimination allegations
on the amount off the MLS. That means it’s OK to offer compensation amounts verbally, in emails or texts, and even on their brokerage’s own website, as long as it’s not done on the MLS. “Although sellers can elect not to pay any buyer agent compensation, that doesn’t mean they will avoid the economics,” says Budge Huskey, president and chief executive of Premier Sotheby’s International Realty in Naples, Florida. “Buyers may easily write into any offer a contingency requiring that the seller cover the cost, or may request other concessions, such as closing cost assistance in the dollar amount they are paying their representative.”
side price war” — buyer agents will begin competing for clients. Others fear a darker turn. Ken H. Johnson, a real estate economist at Florida Atlantic University and a former real estate broker, says the new rules just add another layer of complexity to an already confusing process. “No longer advertising buyer agent commissions will only create a more confused and drawnout transaction process as buyers, sellers and agents will have to negotiate the fee, who will pay for it and how much will be paid by each party,” Johnson says. “Due to this added level of complexity, buyers will almost MARK ZALESKI / THE TENNESSEAN / USA TODAY NETWORK VIA IMAGN IMAGES certainly have to negotiate with more sellers before they find the A house for sale in Nashville, Tenn. on Monday, Nov. 11, 2024. Does this mean commissions deal they are satisfied with.” are now negotiable? Who pays? agents and buyers. Even this has been a bit murky. A federal judge gave prelimiTechnically, real estate commis- Concerns for first-time buyers Agent fees came out of the seller’s nary approval to the settlement in sions always have been negotiaMany in the real estate industry proceeds at closing, but it’s reaApril 2024, and the final holdout ble — a theme NAR long has worry that first-time homebuyers stressed. Practically, though, the sonable to assume that the seller among the brokerages named in the suit — HomeServices of Amer- picture gets complicated. In many — those who need expert guidadjusted their price accordingly — the fees were baked into the ica, part of Warren Buffett’s Berk- cases, Realtors are more skilled at ance the most, and who are alnegotiating than their clients, so home’s sale price. And so the shire Hathaway — also settled in ready severely hampered by high buyer ultimately paid, just not di- April. The rules took effect August the consumer comes into the neprices and high mortgage rates — will be priced out of professional rectly to the agents: That extra 5% 17, and final court approval was gotiation at a disadvantage. granted November 26. representation. If commissions no was rolled into the home’s sale What’s more, the buyer’s agent Compared to the old model, the commission was previously deter- longer come out of the seller’s price. new version offers a greater level mined by the seller, not by the proceeds, the thinking goes, buyWhat’s changing? of transparency for consumers — buyer. The new rules shift that re- ers won’t have an additional The biggest change is that list- homebuyers now will be fully $7,500 or $10,000 to pay an agent. sponsibility to buyers, who now “Most of those buyers are ing agents (the agents who repre- aware of how much they’re paying will discuss compensation discraping the barrel to the bottom sent home sellers) may no longer for an agent’s services. “It’s alrectly with the agents representto come up with a down paymake offers of compensation to ways good when people undering them. buy-side agents on any NAR-affili- stand what they are and are not ment,” says Dave Liniger, chairIs this good or bad for paying for,” says David Druey, ated multiple listing service man and co-founder of RE/MAX. Florida regional president at Cen- consumers? (MLS). In addition, a buyer’s For now, buyers can’t roll comUntil we see how things shake agent must now have a written tennial Bank. mission costs into their mortcontract with a home shopper, An important aspect of the new out over time, the answer really gages under the new rules. But depends on who you ask. Some clearly specifying their fee, bemodel for agents: While the new industry players widely expect foresee a near-nirvana for conrules prevent listing agents from the Federal Housing Finance fore they may show that client a posting buy-side commissions on sumers: Vishal Garg, CEO of mort- Agency, overseer of mortgage gihouse. Until now, NAR encourthe MLS, as they used to, sellers aged but didn’t require written gage company Better, predicts the ants Fannie Mae and Freddie Mac, and listing agents still can agree agreements between buy-side settlement will unleash a “buyto change those rules.
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Candice Williams THE DETROIT NEWS Rocket Mortgage is suing the federal government, seeking dismissal of a law suit that claims the Detroit lender discriminated against a Black homeowner who received an allegedly low appraisal when seeking to refinance her property loan. Rocket Mortgage said Thursday that its federal lawsuit against the U.S. Department of Housing and Urban Development challenges what it calls inconsistencies between regulations that require appraiser independence and enforcement actions that hold lenders accountable for those appraisers. Rocket Mortgage filed a motion to dismiss the Department of Justice’s lawsuit against the company, which it says is based on “the same regulatory conflicts and incorrect application of the law.” “It is unreasonable that the DOJ chose to sue Rocket Mortgage for the conduct of an independent appraiser,” Bill Emerson, president of Rocket Companies, said in a statement Thursday. “We will not stand idly by while the courts are used as venues to leverage our company’s name to publicize the case instead of the pursuing justice against those who may have committed wrongdoing. “Today’s filings highlight the conflict between HUD’s regulations and the DOJ’s enforcement positions. We are looking forward to laying out all the facts of this case in court. Rocket Mortgage has thousands of passionate team members who focus every day on doing the right thing. It would be an offense to our workforce if we let the DOJ’s and HUD’s wrongful actions go unchecked.” The lawsuit follows a filing from federal prosecutors in October accusing Rocket Mortgage of discrimination after an appraiser allegedly undervalued a Black woman’s home, despite rising property values in her neighborhood.
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awaiiana currently serves over 60 residential and commercial associations on the Island of Kauai. Kauai native Sunshine Ruiz Hatto serves as Hawaiiana’s Vice President of Kauai Operations from its office at the Kukui Grove Executive Center in Lihue.
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