The Potential Unintended Fall Out Of The NAR Lawsuit
Jennifer Beeston
#1 VA Mortgage Lender In America - Zero Stress Mortgage Experience
Opinion
As I write this it is the end of June and I would argue the real estate industry, home buyers and sellers, are in uncharted, treacherous waters.? I do not see any winners coming from the changes in August. ??There is an absolute lack of guidance and structure with how the new commission rules will be handled.? As a lender in 48 states, I am hearing a variety of answers about how real estate agents will handle the new world but the overall consensus that I am getting is “we will have to figure this out as it comes.”? At the same time, I have buyers asking me daily if their chance at buying a home is over because they cannot afford real estate agent representation.? ?All of this has led me to spend a lot of time thinking about the commission changes, the buyer’s agreement, and the future of Real Estate.?
Here are a few of the questions that I believe need to be answered before the August roll out
Americans often come into the homebuying and home selling process knowing very little and relying on professionals to guide them.? How do we suddenly expect them to know how to negotiate a commission agreement and to understand the financial implications?
Whose responsibility is it to educate them? The quick response would be the real estate agents, but do we really think that someone is going to educate and teach people how to pay them less? That is an unreasonable ask.? We do not ask any profession to teach clients how to negotiate against them so why would expect Real Estate Agents to?
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How are unrepresented buyers going to access homes?? I am already hearing from some listing agents that they will not show the homes to an unrepresented buyer as they do not want to end up in a dual agency lawsuit.? I have heard that some agents are talking about having buyers sign a buyers agreement to access an open house or not do open houses at all. I have also heard the exact opposite.? Overall, the general consensus is no one knows what they are going to do and they are waiting on guidance.? ?I wonder if the DOJ and NAR are thinking about the unrepresented buyer and the potential implications and if it could lead to disparate impact. I worry about this.?
If unrepresented buyers do not have equal access to view homes, are we widening the housing gap between the haves and have nots?
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Following up on point 2, the government, at both the local and national level has come out with a variety of down payment assistance programs and initiatives to help buyers who could otherwise not get into a home.? If they do not have money for a down payment, how could they afford the cost of a Real Estate Agent out of pocket? ?
And lastly as a mortgage lender, my job is to properly prepare and qualify buyers. If a buyer is paying a real estate agent commission this is a closing cost that we need to take into account when we are doing numbers.? None of the current guidance requires real estate agents to give the buyers agreements to lenders during the qualification process. ?VA requires the buyer’s agreement as part of the contract but neither Fannie or Freddie have any requirement at this time at any point in the transaction.? If we have a conventional buyer who is tight on funds and the structuring of the loan requires reserves, the commission could decrease the reserves and make an approved loan a decline. If the buyer does not have money to pay the real estate agent but has signed that agreement how is that going to work if the seller is not paying? Are we going to see after close payment plans? ?
At this point I am asking all buyers who have signed an agreement to give to me so I can review but also so I can talk to the agent about their expectation so I can properly do numbers.? I have already been told to “stay in my lane” more then once by real estate agents.? However, this is now "in my lane" as it affects the structuring of the loan and closing costs. Thankfully the majority of the agents I speak with 100% understand but what to do about the ones that do not?
Bottom Line: When I say there are no winners, it is because this is being rolled out without taking into consideration the people it actually affects at a root level, the American home buyer and home seller.? ?There are very few guard rails and a lack of structure.? A lot of people have been comparing it to the mortgage industry changes and Dodd frank.? The difference is that Dodd Frank is very specific in what you can and cannot do.? The changes in August are vague and up to interpretation and the only people who benefit from a lack of clear rules is lawyers.? ?Overall, these changes could benefit the American consumer but without clear structure and rules it creates more uncertainty and risk for everyone.
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What do you think?? Weigh in? ??
As an unrepresented buyer, I was recently told by the listing agent that they will charge $50 to come out to show us one of their own listings as it is an hour away from their office.
Education Management Professional
3 个月I think a lot of things will happen here (I am not a realtor myself but I live with one in California). 1) The cost of realtor representation will be all over the place with no uniform pricing for a while. 2) Buyers may have to pay their own agents if the seller does not want to compensate. 3) Unrepresented Buyers can get a tour by calling the seller's agent or owner for the particular property they want to tour or go to an open house, but will get a disclaimer that they only represent the seller and that no other information or services will be provided to them if they choose to be unrepresented. 4) Unrepresented buyers will be responsible for writing their own offers, obtaining financing, all other paperwork, appraisals, escrow, title, etc. As to forms, unrepresented buyers don't have access to the realtor association forms, and will need to use the public versions, versions used by FSBO sellers, versions from the internet, the city or county version, those from from a title or escrow company, have an attorney author them, or author them themselves. These will be less vetted and transactions may be more risky.
#ALLOFUS should applaud Jennifer Beeston for also saying what needed to be said. As I said on an earlier post, have our lawmakers lost their sense of practically? For those looking for the right answers, this post amplifies the very real impact of our court's landmark NAR decision. We know that no one can actually see around corners, but there are those that care enough to alert us the consequences of going where we probably shouldn't go. However, with the right voices of advocacy, we can always change direction.?I agree with everything Jennifer says here.
Veteran Helping Other Veterans with VA Mortgages In All 50 States | David Westlake, NMLS# 2619293
4 个月A great analysis of the unintended consequences of the NAR ruling. Until these questions are answered, you're right--only the lawyers will benefit...at the expense of homebuyers and sellers.
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4 个月I concur! Thanks Jennifer. I believe that approaching the August deadline, they will announce that they need additional time to properly outline new policies and guidance. I have watched the local Coldwell Banker office release and train their agents on the implementation of an impressive, new buyer's agency agreement that addresses many issues, but obviously not all of them. Many brokerage aren't equipped to draft properly updated contracts without using vetted, locally sourced content from larger agencies. I completely agree that the unintended consequences are specifically going to negatively impact first-time homebuyers as well as the housing industry as a whole. We're deep into this storm and need to charge through to a more robust, balanced market sooner than later.