Last weekend, the sun was shining, the birds were singing, and the Magnolias were in full bloom. On Sunday, I hosted 533 Boulevard Way, a beautifully renovated classic that opens out to an extraordinary backyard, and I wasn’t alone. There were several other fantastic Piedmont properties available for viewing. (Please visit me on Saturday if you haven’t yet seen it.)
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The personal stories of one Realtor’s battles and triumphs in the highly-competitive Bay Area Real Estate Market, seeking to illuminate and humanize the very real ups-and-downs of homeownership.
With longer, warmer days ahead, Spring has finally sprung (ignore this weekend’s forecast for more rain). As is typical for this time of year, we start to see many more houses come to market. Every top-producing Agent I know is running full speed to ride the wave. (Yes, I know it’s a mixed metaphor; no need to write.) In Real Estate parlance, this is our own version of “March Madness.” “Surf’s Up, Dude.” Adding to March Madness comes unsettling news that the NAR (National Association of Realtors) has settled a nationwide class-action lawsuit centering around compensation to Buyers’ Agents. The unfortunate takeaway being that Listing Agents may no longer publish buy-side compensation on the MLS (Multiple Listing Service) beginning mid-July (making commissions LESS transparent, not more) and that Sellers may no longer be required to pay for the buy-side commissions. (As an aside, commissions have always been negotiable as stated on the first page of the California Listing Agreement, but don’t let facts get in the way folks.)
Who really benefits
The reports that these changes will lead to more competition and reduce the cost to Buyers seems preposterous, in light of the fact that the ruling clearly favors Sellers – OR does it? (I think the class-action lawyers actually will benefit the most.)
Sadly, the outcome is destined to create disparate and tertiary effects the courts failed to recognize, including disadvantaging first-time Homebuyers, VA and disabled borrowers, and historically disenfranchised Buyers (generally, all lower-end buyers). If you don’t think these less well-heeled Buyers matter to the higher-end marketplace, it’s important to note that first-time Buyers often become more seasoned Buyers as they gain equity! We WANT and NEED new Buyers to enter the marketplace to keep the higher-end healthy as well. And not for nuthin’ but we should honor Buyer’s Agents who must now navigate the cataclysmic changes ahead while still delivering skilled representation.
So it occurs to me that while I’ve written a great deal about the “value proposition” of Selling Agents, I’ve spent too little time explaining what Buyers’ Agents bring to the process, so let me take this opportunity to even the score . . . . The reality is that Buyers’ Agents are critically important, despite this latest ruling that might lead many Sellers – not to mention the general public – to believe otherwise.
Giving Buyers’ Agents their due
“But WE found our house on the Internet; our Agent didn’t even show it to us.”
That’s undoubtedly true given that the MLS is now open and available to anyone and EVERYONE via a plethora of popular and well-financed search engines (take your pick). I’ve been at this long enough to remember that in the not-too-distant past, licensed Realtors® (and only licensed Realtors®) previously held the keys to the portal. Consequently, if you wanted to know what properties were for sale in a given neighborhood, you invariably needed a local Realtor® to do the research, schedule showing appointments, put you in their car, and drive you from property to property. That’s certainly no longer the case. (I’ll grant you that.)
However, finding you the “perfect house” isn’t where your Agent earns his or her keep. Their true “value” is realized by explaining the contracts, preparing you to write, connecting you with a trustworthy lender, crafting a compelling offer, having your offer accepted, educating you about the context and value of identified properties, combing through the disclosures, pointing out any red flags, knowing the distinct qualities of a neighborhood, advocating on your behalf, leveraging professional relationships, recognizing and requesting when additional inspections are warranted, negotiating any unforeseen concerns that arise, seeing you through the escrow process, and tracking the many moving pieces from beginning to end. (That’s just the short list.)
Is it possible that with the advent of AI, there may come a time when Artificial Intelligence will actually write the purchase contract for you, eliminating Buyers’ Agents altogether? (Perish the thought.) No matter how advanced, AI cannot accurately evaluate the benefits of a community, or understand the pros and cons of a particular property. It takes a skilled Buyer’s Agent to know the lay of the land, and years of experience to walk Buyers through a process that is inherently overlayed with uncertainty and stress, requires a significant amount of capital, and is unfortunately, prone to litigation.
Moreover, given that a home purchase usually represents one’s single-largest investment, discounting the Buying Agent’s fee is likely to result in a less-than-stellar representative as desperate “flat-fee” Agents enter the marketplace, which is no place for the uninitiated, first-time Homebuyer. However, if you’re looking for a quick, cheap, transactional relationship instead of a fiduciary one based on trust and care, I’m certain you’ll be able to find discount Agents who will do little more than push you to part with your hard-earned money while making an uninformed decision. Because frankly, “you don’t know what you don’t know.” (Forget “Million Dollar Listing” – that’s NOT how it works in real life.) Consider this your warning: “Buyer Beware” may take on a whole new meaning.
Finally, if a Seller wishes to eliminate a large part of their buying pool, the fastest way to do so is to discount or negate the buy-side commission as Buyers are likely to respond by moving toward a property that ISN’T requiring additional cash on hand. (Mortgage lenders do not finance commissions, while others WON’T allow Buyers to pay commissions.) It’s simple math. Many Buyers won’t be able to afford the extra out-of-pocket expense.
In the end, if a Buyer is left to pay their own commission (and we may be headed there), they will certainly back that number out of their offer price, or add it in and ask for a credit. In other words, no matter how you slice it, the commission will likely still come from the Sellers’ profits.
March Madness? We’re just beginning to adjust to this significant shift, and I suspect there’s much more to come as we navigate the new rules and restrictions, but please, let’s give skilled Buyers’ Agents their due (they’ve earned it.)
Grab a board, the water is definitely gnarly out there.
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Julie Gardner & Sarah Abel | Compass Realty
Not just Realtors, but consultants in all things house and home, we’re here to educate, explore, examine and refer . . . In short, you may count on us to take care of your home as if it were our own and anyone who knows us, knows we take pretty darn good care of our homes.
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