A Message from Tom About Realtor Commissions

There is a lot of talk about real estate agent commissions following the National Association of Realtors (NAR) settlement. The commentary includes speculation the proposed changes may lead to lower house prices. This remains to be seen as prices are set by the market and not by realtor commissions and the other costs associated with selling a home.

If implemented, the proposal will mean significant changes to the MLS. Supposed to start in July, realtors listing a home in a multiple listing service will no longer be able to stipulate the buyers agent commission. Also, buyers agents will have to have a signed buyers agreement with their clients before they can show their clients any properties.

It got me thinking that we have not done a great job of communicating the value of why people buying a home will need a buyer’s agent. Generally, it is understood what value we bring to sellers This includes helping determine a fair market price, preparing the property for market, listing it on the appropriate MLS, and marketing the property to potential buyers. There’s research that shows people who sell their property themselves (For Sale by Owner) get 26 percent less than people who use an agent.

Buyers have their own needs and deserve their own representation especially when you consider buying a home is often the biggest financial decision a person makes in their life. A good buyer’s agent will know the local market, help find the right home at the right price, negotiate with the sellers agent, guide buyers through the inspection and appraisal processes, and offer advice on local lending options.

This is very time consuming, and the complexity of real estate deals means it is best for buyers to have a licensed professional on their side. There is also research that shows people without agents pay more for their home than people who have an agent. My strong belief that buyers agents are there to protect the financial interests of their clients is the reason that no agents in my office are permitted to work both sides
of a deal.

Working with an ethical professional is even more important in a place like Galveston where we have unique local considerations including flood insurance, elevation certificates, building codes and historical neighborhood restrictions to be considered.

If we accept buyer’s agents are professionals, then it makes sense they deserve a professional fee. This rate may be negotiated and if the seller is no longer paying it then the buyers may need to add it to their down payment. At present, lenders cannot include a commission into mortgages. Therefore, this proposal
may make it harder for those purchasing their first home with an FHA loan or for veterans to use a VA loan. While a skilled agent may get a seller to add the buyers commission as a seller concession, in the same way we have negotiated for other concessions such as home repairs or for furniture to remain with
the home, how will that affect an appraisal?

More industry changes are likely as The Department of Justice and the Federal Trade Commission weigh in and lenders respond too. The only constant is change, so remember now more than ever, effective communication between all involved in a transaction will make sure everyone is satisfied.

My hope is for both sellers and buyers is to make sure to Talk to Tom’s Team because it is more important than ever to work with a skilled professional who is in your corner and negotiates to protect your financial interests.

As always, contact us if you have any questions!