Understanding the Latest Developments in Real Estate (It's a necessary read)

Okay this a little bit of a read however it's necessary as we have some huge changes on the horizon that will be beneficial to both Buyers and Sellers in different ways.

You may have noticed recent headlines discussing imminent shifts in the residential real estate landscape, particularly in light of a landmark case involving the National Association of Realtors (NAR) and other ongoing legal proceedings. Unfortunately, much of the media coverage has been misleading, "Click Bait" and I want to ensure you have accurate information about these developments and their potential implications most importantly how it will effect you in the future in terms of your residential real estate buying and selling in the SF Bay Area or in the Domestic USA.

Traditionally, the commission for a Buyer’s Broker has been covered by the seller as part of their listing agreement, which was then shared on the Multiple Listing Service (MLS) letting buyers agents know that there is a cooperative broker fee involved in this sale which would incentivize them to show the property and get it sold. This longstanding model facilitated easy listing sharing and leveled the playing field for buyers, enabling them to finance their broker’s commission through the sale price rather than reducing their down payment funds. (This is one of the big things that will change and effect buyers) This empowered buyers to make more competitive offers, particularly when competing against cash buyers, and we believe ultimately leading to higher sale prices for sellers.

Given the success of this model, we encourage sellers to continue offering commissions to make their properties more competitive and potentially fetch higher prices in the market depending on price point of the sale and how many buyers are in that category of home.

Example One: The $5M buyer would have to pay their agent a $125,000 fee using a 2.5% model. (The buyer is paying for experience, legal protection, and really looking out for their best interests on a purchase so large, due dilligence, service providers, the whole 9, they can stomach it and it will make sense to have great representation)

Example Two: The $1M first time home buyer would have to pay their agent a $25,000 fee using a 2.5% model. (Apart from the $200k down payment they have saved years for and closing costs which come out to another roughly 2-3% of the purchase price, a buyer coming up with another $25,000 to pay their agent you can assume will become an issue)

Upcoming changes slated to take effect around mid-July pending approval may impact this arrangement:

? Seller Paid Buyer Broker Commission: Sellers may no longer unilaterally offer buyer broker commissions in the MLS. Sellers can still offer buyer concessions, such as closing cost assistance, as long as it is not directly tied to the Buyer-Broker Commission. Sellers are not obligated to offer any commission to the buyer’s broker.

? Buyer Representation: Buyer brokers participating in the MLS will now be required to execute a Buyer-Broker Representation Agreement with each buyer, similar to the listing agreement with sellers, which covers their duties and compensation.

The lawsuit settlement is intended to bring clarity to the commission process and ensure that consumers were aware that commissions are negotiable, as we have maintained throughout. Each broker and agent can set their fees, similar to compensation for legal services, and buyers will now contract directly with their broker for transparency.

While we don’t anticipate significant changes on the listing side of the business, buyers will now formally engage the services of their agents under a compensation agreement, which will make them more inclined to select professionals of a higher caliber to represent them.

We believe these changes will underscore the invaluable role professional agents play in navigating the complexities of the home purchase process, which often represents the largest single investment for clients.

As agents with a globally recognized brand representing esteemed clientele worldwide, we will continue to serve your best interests amidst these evolving dynamics. Should you have any questions or concerns, please don’t hesitate to reach out via call, text, or email.

Warm regards,

Roh