Justifiable Real estate agents believe the worst is over, and the Department of Justice (DOJ) is considering further changes to their commission structures.
Groundbreaking legal agreement worth $418 millionnegotiated in March after some negotiations DOJ Litigationeffective August 17. precipitationwill now be Easier Homebuyers can negotiate fees with agents rather than being stuck with the traditional 5% to 6% commission structure –the highest among them in the world.
The result could be that buyers decide to abandon agents altogether, lowering commissions and forcing agents out of the industry. back a lot of speculationthe government is deciding whether the March deal goes far enough,if they There should be a push for further changes to the costs associated with buying and selling a home.
according to wall street journalthe Ministry of Justice has participated in in two industry lawsuits. It also sent a formal letter to the California Association of Realtors asking about the legal forms agents use during the home sale process and to real estate companies about their listing agreements.
Justice Department hopes to reduce workarounds
The Justice Department is particularly concerned that agents may use workarounds to circumvent the March settlement, which received final approval from a federal judge in November. In the intervening months, the Justice Department will reconsider whether the settlement Enough has been done to reduce commissions.
Under the current settlement, analysts predict the changes could result in a 30% reduction in losses of $100 billion. that american Real estate commission paid to buyer’s agent 2.5% to 3% annually is decreasing.
Consumer advocates worry that influential buyer’s agents could steer their clients toward properties where they are charging commissions and away from homes where they are not, or warn sellers that their listings could be affected. . no receive same Traffic from buyers (if they are agents) not compensated. Additionally, while there may not be a formal agreement to compensate the buyer’s agent, other type Compensation strategies can be used.
“NAR — and I personally — oppose any attempts to circumvent the settlement agreement,” Kevin Sears, president of the National Association of Realtors, said in a letter to members. “We hope the Department of Justice continues Investigate industry practices.”
Consumers Union, on the other hand, has contacted the Department of Justice about an early draft of the proposed changes to the California Association of Realtors forms, which they believe warrants concern.
“I’m not optimistic that state associations will come up with anything that’s fair to consumers,” said Stephen Brobeck, senior fellow at the Consumer Federation of America. wall street journal.
In a possible sign nationwide, the Justice Department objected to a different settlement in a lawsuit against the Massachusetts MLS, saying it didn’t go as far as the government agency had hoped.
turn the situation around
The U.S. Department of Justice has a a long history Investigating and intervening in residential real estate operations, lawsuits have been filed by both Democratic and Republican administrations. The final decision rests with the judge, but people think that The Justice Department’s opinion could turn the tide.
“This to some extent changes the judge’s perspective on settlement agreements. achieved Chuck Cain, senior vice president of the National Institutions Group and real estate attorney at FNF Family of Companies, said: house line in April. “Before He may have just accepted everything based on the appeals court ruling, but now, with the Justice Department getting involved, he may decide to delay approval to wait and see what happens with the Justice Department.
“I think one thing [the DOJ] What may be objected to is the amount of civil relief,” Kane added. “They may want the actual amount to be higher [than the currently proposed $418 million] Send message.
What’s the endgame for DOJ?
“The DOJ is eager for the NAR to enact a rule that prohibits combining the commission paid by a seller to its listing broker with any commission a buyer’s broker may seek to procure a buyer,” Saul Real Estate attorney Frances Riley told Ewing Law Firm. house line. “NAR’s settlement of the class action lawsuit does not achieve this goal; therefore, the Department of Justice will conduct further investigation of NAR and may initiate litigation.
What does the lawsuit mean for real estate investors?
With all of these changes coming, there are many implications for real estate investors. Here are some of them.
less exist Commissions can mean more profit
For real estate investors looking to reduce transaction costs for buying and selling real estate, the less they have to pay arrive agents, the more they can retain, so that can only be good news. But in reality, agent commissions have always been negotiable. For full-time investors who bring consistent trades to an agent, a low fee structure is often A accustomed movebecause the agent has normal business, he is happy to agree.
Prices may fall, but out-of-pocket costs may increase Increase
Changes in agency structure could lower home prices. However, if the buyer has to pay the agent out of pocket, Closing costs can increase. In an ideal world, the two would cancel each other out. However, there are too many variables, such as supply and demand, to expect this to happen.
Investors/agents may have to readjust their enterprise
for Investors who also act as agents and represent other buyers and sellersthis news may be bittersweetdepending on how much of their business comes from agents or investments. However, many buyers cannot Ability to pay agent fees later pay for one down payment and other closing costs.
Proactive sellers offer buyers offers to help them cross the finish line when buying a home. still need visible Exactly how much the changes to the Justice Department settlement will affect the workaround.
For most investors, trading volume and Complete transaction is More important than trying to stack profits onto every trade. Agents who also invest will still have access to MLS And if they house flippingcan still make money from the sale, waive their agent fees, and potentially sweeten the deal for the buyer’s agent.
final thoughts
real estate agent is Not too possible to get a lot of The public sympathized with the loss of commission income. In an election year, public sentiment plays a big role,at the same time While the Justice Department is supposed to be politically impartial, it remains a government agency with an outsize role to play in an overheated, largely unaffordable housing market.
On the other hand, when live streaming a real estate show, e.g. Netflix own manhattan While luxury listing agents can earn six-figure commissions, the reality is that this does not represent what most agents earn. Due to high prices and interest rates and low inventory, many agents Hard life And requires every commission check. Many drop out of school and seek other forms of employment. News that the Justice Department may take another hit on their revenue could continue that trend.
At a macro level, the use of social media may lead to more homeowners forgoing agents and commissions to sell their homes, especially if they no longer have to pay a buyer’s agent. Investors may be pleased with the news Must pay Less commissions, especially if they don’t generate commissions my own Lead and rely on MLS.
However, in a tight market, many people still rely on a well-connected buyer’s agent to bring them deals that might not otherwise be available. They may view commissions as the cost of doing business.
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