The nation’s top real estate industry group is proposing a settlement that could completely reshape the real estate industry. While legendary, it has the potential to make an already complex and convoluted process even more difficult for many home buyers. Put forth by the National Association of Realtors (NAR), the NAR-run Multiple Listing Service — a database of homes for sale — would remove the buyer’s agent commission. In essence, buyer’s agents wouldn’t have compensation offered upfront.
While 4%-6% is the average and expected rate, the sellers usually pay this out of their sale, and it’s then divided by the buyer’s and seller’s respective agents. This would mean that instead, this would now need to be paid by the buyers. Many already have a hard enough time coming up with the 8% down payment for the home. Adding up to roughly $32k on a $400k median value home, they then need to find the 1.2%-2.5% of the home’s value for closing costs.
For many, these costs can be rolled into the mortgage when the appraisal comes in higher than the sale price, but in this economy, that hasn’t been happening as frequently. This means $42k on average to buy their home, and in this economy, it simply isn’t doable.
Greg Schwartz, CEO and co-founder of Tomo, a digital mortgage lender, is especially concerned for first-time home buyers. “Folks really scrape to come up with the cash needed to buy a home. If buyers need to come up with an additional $12,000 — 3% of the value of a $400,000 home — to pay an agent’s commission, it’s just not going to happen. The stakes are high here. And the seller’s agent has a fiduciary obligation to the seller, not the buyer. They’re there to get the most for the seller. So these are dangerous times. (The) NAR settlement spells disaster for first-time home buyers.”
