Is buying a home going to get 6% cheaper?

[marylander1940]

 

OP note: Americans pay 100 billion per year in commissions, I'm sure they'll come up with a flat rate, luxury tax, passing advertisement charges to the seller, etc. 

Realtors settlement eliminates standard 6% commission

WWW.FOX9.COM

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Some are calling it a seismic settlement that could upend the bedrock of the residential real estate market.

 

[Beancounter]

Interesting read.  I’m curious as to how this will play out.  Having sold a house and paying a 6% realtor fee, I always felt it was a bit excessive.  However, a good realtor is worth their weight in gold especially when it comes to the legal ramifications of selling property.  Bad realtors (and there are plenty) can cause a property owner numerous headaches.  

[+ Lucky]

With the dearest respect to the OP, real estate agents are not going to suddenly work for free.

[Kevin Slater]

8 minutes ago, Lucky said:

With the dearest respect to the OP, real estate agents are not going to suddenly work for free.

but they're no longer going to have a monopoly, either.  (Ok, not 6% cheaper, but most analysis I've read suggests fees may drop to 2 - 3%.)

Kevin Slater. 

[+ Lucky]

Well, I paid 5% on my first home, and 2% on the second.

[+ stevenkesslar]

This will have to lower costs for the typical seller, it seems.  The part I don't understand at all is how this will work for first time buyers.

The realtor commissions have always been at least somewhat negotiable, anyway.  And sellers can still pay the commission for the buyer's agent.  They just can't say on MLS that they will pay the buyer's agent 2.5 % or 3 %, which seems to be the most common standard in California today.  For a buyer who just sold an expensive home in LA or SF and wants to buy a home in Palm Springs for cash, having to pay for their own agent is not really going to be an issue.  it's just part of the negotiation.

For a first-time buyer, it doesn't seem likely, or even possible, that this makes buying a home more affordable.  I've never bought with FHA or VA, because I don't like paying mortgage insurance.  But I think for someone struggling to put together the money you need upfront, something like 3 to 5 % is in the ballpark of what can actually get you in a home.  I'm not talking about down payment.  I mean what you actually pay after you negotiate what the seller will pay - like part of the closing costs.  If that's true, if we now say the buyer has to pay their realtor 2 to 3 % as well, that's a huge increase in how much money they have to have.  

I read about half a dozen articles about this to see if any addressed how this might work.  This statement is what I found that seems the closest to what the new reality may be, which is basically one realtor's opinion of the likely outcome:

Quote

He anticipates the market will be pushed to two extremes: low-cost low-service agents and higher-cost, higher-service providers.

“I don’t think there is going to be any middle ground,” he said. “There will be people who provide almost no value – they slap it on the MLS and that’s it. And people who provide limousine service. The general public doesn’t see value in the buyer agent right now.”

What seems almost inevitable is that some marginal buyer who can barely afford to buy a home, period, isn't going to be able to afford a "limousine service" realtor.  They are going to have to find a low cost agent.  And in practice often a seller who will agree to pay whatever that buyer's agent gets paid.  Otherwise the buyer just doesn't have the money it takes to buy.

This is also really nothing new.  A marginal buyer who needs FHA or VA to qualify and can barely scrape by is always going to be less desirable to a seller than someone with cash, or plenty of money to negotiate with.  If you now add this to the mix, I don't see how having to pay a realtor commission helps that buyer.

The idea of "concierge medicine" seems like how this could play out over time.  Affluent buyers who have cash can afford to pay their agents, and might well want "limousine service".  First time buyers who can barely scrape by are going to need whatever the Medicaid version of real estate agents is.

[marylander1940]

On 3/19/2024 at 8:27 AM, marylander1940 said:

 

OP note: Americans pay 100 billion per year in commissions, I'm sure they'll come up with a flat rate, luxury tax, passing advertisement charges to the seller, etc. 

Realtors settlement eliminates standard 6% commission

WWW.FOX9.COM

---

Some are calling it a seismic settlement that could upend the bedrock of the residential real estate market.

 

 

11 hours ago, Lucky said:

With the dearest respect to the OP, real estate agents are not going to suddenly work for free.

I guess you didn't understand my first post. 

[marylander1940]

10 hours ago, Kevin Slater said:

but they're no longer going to have a monopoly, either.  (Ok, not 6% cheaper, but most analysis I've read suggests fees may drop to 2 - 3%.)

Kevin Slater. 

Exactly now it will be negotiable. Contrary to the popular belief in most cases it was 6% by default but no law required it, and many got cheaper rates based on competition, negotiation, etc. 

[+ nycman]

1 hour ago, marylander1940 said:

Exactly now it will be negotiable.

It was always been "negotiable". 

I bought and sold quite a bit of real estate over the years. I never paid 6% commission. As soon as negotiations over the price of the property started, I’d turn to the real estate agents and say, "I’ll change my offer as soon as you lower your commission." Worked every time.

Edited March 20 by nycman

[marylander1940]

6 hours ago, marylander1940 said:

Exactly now it will be negotiable. Contrary to the popular belief in most cases it was 6% by default but no law required it, and many got cheaper rates based on competition, negotiation, etc. 

 

4 hours ago, nycman said:

It was always been "negotiable". 

I bought and sold quite a bit of real estate over the years. I never paid 6% commission. As soon as negotiations over the price of the property started, I’d turn to the real estate agents and say, "I’ll change my offer as soon as you lower your commission." Worked every time.

Quote me fully or don't quote me at all