Market Update July 29th, 2024

The imminent settlement of the National Association of Realtors (NAR) Commission has introduced a cloud of uncertainty and confusion within the real estate industry. The Council of Multiple Listing Services (CMLS), representing 225 MLS providers nationwide, has refrained from offering best practice guidance to its members. Instead, it has encouraged them to engage in "thoughtful conversations" and to independently navigate their responses, which suggests that the impact of the settlement could vary widely across different regions. This variety in response is further complicated by the NAR's settlement FAQ webpage, which has expanded to over 100 questions, indicating the complexity and widespread concern about the settlement’s implications.

Recent data on commission rates show a slight decrease but maintain a relative consistency, with buyer's agents historically earning between 2.6% and 2.8%, and listing agents earning between 2.8% and 3.2%. These rates have recently adjusted to slightly lower percentages. The stability of these rates amidst the fluctuating market dynamics underscores a persistent uncertainty about future commission structures and their potential variations over the coming year. This lack of consensus among industry professionals reflects the broader ambiguity surrounding the settlement's long-term impact on real estate transactions.

While the settlement is poised to impact real estate agents significantly, its effects on the broader housing market are expected to be less pronounced, likely reinforcing existing trends rather than initiating new ones. However, the real estate market is currently experiencing a dip in closing activities, with a notable decrease from the previous year and a significant deviation from the long-term average. This reduction in activity, coupled with legal and procedural uncertainties, suggests that the declining rate of closings might persist until potentially mitigated by more favorable mortgage rates.

The Department of Justice (DOJ) has criticized the high real estate commissions in the U.S. compared to other developed economies and is pushing for reforms to lower these costs. They advocate for a model where buyer’s agent commissions are negotiated directly between the buyer and their agent, independent of the seller or selling agent's influence. This shift could lead to lower upfront costs for buyers, but it may also reduce the level of advice and support buyers receive, which could be detrimental given the significant financial stakes involved in real estate transactions. Thus, while the settlement aims to reduce costs, the overall quality and comprehensiveness of real estate services could also decline, echoing the adage that one often gets what they pay for, particularly in professional services like real estate and legal advice.

If you have questions about the recent changes coming to real estate commissions and how they affect you and your home pricing, please reach out to me I am here to help guide you through the confusion the media throws out there with misleading and false information! It is vital to understand the changes and how just listening to the media could tremendously impact you in a negative way!

Have a great week everyone!