Real estate investor Debra Falese thought that the recent agreement was really bad because it makes home shoppers sign contracts with their agents. A really important agreement about how much Realtors get paid is seen as terrible by Debra because it makes buyers have to sign contracts with their agents.
This might force buyers to work with agents they don't trust, according to property owner Morgan Hedrick.
New homeowner Morgan Hedrick is worried that the agreement means future buyers will have to pay broker fees out of their own pockets instead of from the sale of the home.
At an open house in Downey, one home shopper was visibly angry and said the agreement doesn't help consumers.
A man at the open house complained about having to pay his own agent, saying there are already hidden fees and now there's another fee that comes out of his pocket.
Homebuyers, sellers, and the real estate industry as a whole are facing an uncertain transition due to the proposed agreement signed by the National Association of Realtors in mid-March.
The National Association of Realtors agreed to pay $418 million and to stop the requirement for home sellers to pay their buyer agent’s commissions after facing more than 20 class-action lawsuits accusing them of price fixing. A majority of home shoppers asked at open houses either hadn't heard about the agreement yet or had only a vague idea of what it means.Many people who have been following the news expressed concern that first-time buyers or those new to an area will face more difficulties because of the agreement.
Many buyers may not have good representation or any representation at all because they can't afford more experienced brokers, according to some of them.
Many are worried that in a seller’s market, buyers might hesitate to ask the owner to pay their broker fees because it would make them less competitive than other bidders.
Hairo Alonzo of Buena Park said that from what he understands, the agreement won't benefit the buyer.
He thinks the commission for the buyer’s side of a transaction should stay as it was.
It's uncertain what will happen next.
Plaintiffs’ lawyers argued in the lawsuits that seller-paid commissions kept broker fees artificially high.
Some lawyers, economists, and consumer advocates say commissions will decrease because buyers will negotiate directly with their agents, creating more competition among brokers.
The agreement is long and complex but two key provisions stand out.
Sellers would be prohibited from posting offers to pay buyer broker fees in listing databases, and buyers working with a Realtor would need to sign contracts showing how much their agent will get paid before they can visit a single home.
The agreement, which still needs court approval, is expected to take effect in July.
It doesn’t specify who will pay buyer commissions in the future, so while buyers could end up paying their own fees directly, seller-paid buyer commissions aren’t necessarily a thing of the past.
For instance, sellers can still advertise offers in the MLS to provide “concessions,” which buyers can use to pay their broker fees.
Many questions are present
A few agents are beginning to receive inquiries about the settlement from their clients.
“At the moment, we’re being asked questions during listing appointments,” said Letty Vermeulen, an agent with Aspire Los Angeles. “People are somewhat confused about what that’s going to mean for them. And I think sellers want to ensure that they’re still being competitive, that their listing is still going to get the attention it deserves.”
According to Vermeulen, if buyer fees are lower, they’ll have more money to spend on a house.
“Buyers want to understand how they can potentially negotiate their fees, because obviously that’s going to put them in a better position to purchase,” she said.
However, other buyers are concerned they’ll have less to spend if they pay their commissions directly.
According to The Wall Street Journal, some home shoppers are rushing to buy a home before the settlement takes effect.
Buyers who were aware of the settlement were divided on whether it will be beneficial or detrimental for them.
Erin Pan, 36, of Cypress believes buyer-broker contracts could increase transparency, outlining the commission rate and responsibilities of both sides.
But as a homeowner looking for a larger house, Pan is concerned about speculation that the settlement could reduce house prices.
“I want to sell my house at the highest price,” Pan, who works in corporate finance, said while touring homes with her husband, Tim Wang.
Steven To, 60, of Walnut said he thinks the settlement could benefit buyers and sellers if commissions decrease.
Fermin Diaz, 44, of Norwalk said he likes the idea of having a buyer-broker agreement when he buys his next home.
“It has its advantages and disadvantages,” Diaz said. “The advantage is you can negotiate the price. The downside is if they have a minimum, and they go up from that.”
Morgan and Sam Hedrick, after five years of renting, finally purchased their first home in Long Beach in February. However, Morgan is concerned that future buyers like themselves will have difficulty purchasing a home if they have to pay commissions.
“To have to pay 3% on top of a home that you’re already shelling out close to $900,000 on, you know, it’s a lot,” she said. “It’s going to be up to us as buyers to make sure that we can take out that extra percentage to pay our Realtors to find us a home.”
The idea that some buyers will go directly to listing agents “is a little worrisome,” she added.
“We’re making one of the biggest purchases of our life. And to put that into somebody we’ve never met before, we don’t really know if they have our best interest at heart,” she said.
Falese, the Huntington Beach real estate investor, is worried about the buyer contract requirement.
She once signed a contract with an agent to find a rental house in Long Beach. But, she said, “the contract was crazy because it covered all of California.
“I ended up buying two properties in Huntington Beach. So, if I would not have gotten out of that contract in Long Beach, I would have had to pay the agent in Long Beach who did nothing for me in Huntington Beach,” she said.
Does she believe the agreement will be negative for purchasers?
“How can it be anything else?” she inquired.
When she purchased her initial residence, she used the money from her coin jar to assist with her closing expenses.
Currently, buyers are already paying more due to the high prices, she noted.
Paying the buyer’s commission “just adds more burden to the buyers,” Falese said. “It’s a struggle for young people that are trying to get their very first home. I can’t even imagine how kids are making it work these days.”
Struggling to afford today’s prices, potential home buyers are concerned about how they’ll compensate their agent once the agreement takes effect.
At today’s prices, buyers already are paying a premium, she said.
Paying the buyer’s commission “just adds more burden to the buyers,” Falese said. “It’s a struggle for young people that are trying to get their very first home. I can’t even imagine how kids are making it work these days.”
