Neighborhood Expert: Real estate headlines and how they impact you

Laura Schwartz is a licensed Realtor in VA and D.C. with McEnearney Associates in Vienna. You can follow Laura on Instagram at @LauraSchwartzRealtor or her Facebook page. Laura can be reached at 703-283-6120 or [email protected].

Last week you may have read some headlines about how the “6% real estate commission” as we know it is dead. There was a class action lawsuit that the National Association of Realtors ® agreed to settle last week for $418M. Here’s what you need to know about how that impacts you:

What the lawsuit was about

There was an argument that real estate commissions were fixed and it wasn’t clear that the seller was also paying the buyer’s commission. Worth noting: the original lawsuit was filed in Missouri where real estate practice may differ from the way we do things in the D.C. Metro area. We have ALWAYS had forms that the seller signs and that the buyer is required to sign to create representation agreements that clearly spelled out how, and how much, agents were getting paid. And buyers and sellers have always had options of how much service they want and what they were willing to pay for it — always.

What this means moving forward

Part of the lawsuit settlement, if approved, includes the following changes to how real estate is done — the MLS will no longer have a buyer agent commission (also known as selling agent) listed as part of the advertisement. In fact, the MLS will be prohibited from publicly offering one starting mid July of 2024.

There are lots of details to be worked out, including a court approving this settlement, but here’s what you really need to know about buying and selling real estate in the coming months:

  1. Until July, you might see subtle changes but the big changes won’t take effect until then.
  2. Sellers CAN still choose to offer compensation to the buyer’s agent, but how that’s advertised will be different — still TBD.
  3. Buyers who want their own representation will now have to pay for their own agent. You will have to discuss this with your real estate agent and have a signed agreement prior to seeing any houses. 
  4. Buyers can ask for closing cost credit from the sellers as part of their offer to cover the commission of their agent, if they don’t want to or can’t come out of pocket to pay the agent directly as part of their closing costs. Sellers can agree or disagree.

There are parts that bother me that I think got severely overlooked:

  1. Buyers who plan to use a VA Loan (used by our Veterans and/or active duty military) are NOT allowed to pay any fees related to a real estate agent as part of their loan. They don’t even have the option. So unless the VA figures out how to handle this new policy, there’s a lot of uncertainty related to using a VA loan and representation.
  2. First time buyers and FHA buyers — usually believed to be smaller down payments (FHA is a 3.5% minimum and a conventional loan can be as little as 3%), will now also have to come up with more money to pay at closing to hire an agent unless they can get a seller credit to off-set the cost.

I believe the intent of this was to make the process clearer — and that’s a good thing — but the experts think this will bring down home prices because prices were inflated to account for commission. However, I think they’re actually making the entry into owning homes harder. Buyers don’t know what they don’t know and not having an experienced professional to guide them through the process and protect their interests will end up hurting them in this major life purchase. 

More to come on this as things get cleaned up and new policies get put in place, but change is coming.

A miniature house with a key (via Tierra Mallorca on Unsplash)

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