A national legal settlement will change how Oregonians buy, sell homes

A national legal settlement will change how Oregonians buy, sell homes

[ad_1]

The Oregon-Washington real estate listing service RMLS this month announced it will opt into the terms of a national settlement that could dramatically change buying and selling homes, and potentially lower costs.

The settlement, reached in a lawsuit against the National Association of Realtors this spring, prohibits including sale commissions on real estate listings. Plaintiffs in the suit had said including compensation on sale listings amounted to price-fixing, encouraged steering buyers to more expensive homes and inflated agents’ compensation overall.

RMLS will remove commission offers on its listings platform by mid-August.

That throws a wrench into the industry’s common practices, and much remains unsettled about how buyers’ agents will be compensated for advising their clients. But RMLS said it and its agents are prepared for the changes.

Anthony Pitre, a Portland-area real estate broker, said he thinks the change will shake up, but not revolutionize, the way agents do business.

“This too shall pass,” he said.

A consumer attorney, meanwhile, said the decision could increase competition among brokers and perhaps lower the cost of buying a home.

But it might put some buyers in the uncomfortable position of paying out of pocket as they line up the biggest financial transaction of their lives.

Sellers typically paid broker commissions in full — typically around 5% to 6% of a home’s sale price — and often factor them into home prices. The commission is split by both the seller and buyer’s agent.

Though home sellers could list commissions below the standard, it was uncommon because listing agents warned that buyers’ agents might lead clients away from homes that would reduce their compensation.

A 2019 lawsuit filed against the National Association of Realtors argued this system essentially mandated a standard commission rate, violating antitrust laws and inflating commissions. Last October, a jury agreed. The association settled the case in March.

And as part of the $418 million settlement, agents listing homes on a multiple listing service will not be allowed to include buyer agent’s compensation. RMLS said in a news release that it will be released from liability for similar antitrust claims by opting into the settlement’s terms.

Buyers might pay

Instead of the seller entirely footing commissions, buyers will need to negotiate their own deals with brokers — a change that might seem to put those buyers in a worse position.

But some economists argue buyers have been paying all along because the cost of a commission has been essentially embedded in the price of buying a home — perhaps contributing to the soaring cost of homeownership.

The settlement doesn’t dictate how much brokers should receive in commission, but some expect that amount to go down as buyers start to shop around.

U.S. commission rates are already much higher than other countries, and according to a working paper from researchers at the Federal Reserve Bank of Richmond, those rates will likely lower as these rules are implemented.

Michael Fuller, a Portland consumer attorney, said the way real estate agents will operate after the terms are fully implemented is still up in the air, but he said competition will hopefully lead to a better system for consumers.

And Fuller thinks there’s a good chance buyers could end up paying less as a result.

“It should encourage more creativity in the market and also break down barriers to access Realtors without having to pay those hefty NAR fees,” he said.

RMLS chief executive Kurt von Wasmuth said in an email most brokers he has spoken to are ready to start using buyer-broker agreements — written contracts that will define how the broker gets paid. To land a client, Wasmuth said, brokers will need to “explain their value to their customers,” who may prove more discerning when they’re paying out of their own wallet.

A new path for agents

Pitre, the Portland-area broker, said he doesn’t think adopting the settlement’s terms will impact his business much. Across the board, he thinks commissions could go down. But for agents good at their job, he said, explaining their value to prospective buyers will become secondhand.

“There’ll be conversations that have to be had and you know, if you’re comfortable having those conversations, then it won’t change all that much,” Pitre said. “And I think if you’re not comfortable, they have to find another job.”

Pitre said the change could hurt first-time home buyers. He said saddling first-time buyers with broker fees — approaching $10,000 even for a modest house, if they’re equivalent to today’s commissions — could make it even harder to assemble enough cash for a down payment and closing costs.

But he thinks lenders and agents will adapt to help buyers.

“There has always been creative lending, so I think they’ll figure out ways to make sure that those first-time homebuyers are able to acquire properties,” Pitre said. “Or else we’re in trouble.”

Javier Alomia, another longtime Portland-area real estate broker, said another potential issue could be caused by dual agency — where an agent represents both the buyer and seller.

Dual agency is legal in Oregon, and Alomia said it could cause some agents to work deals to benefit themselves.

Some sellers might ultimately continue to foot the bill for buyers, Alomia said, working it into the sale but now as a negotiated way to sweeten the deal for a buyer.

But their willingness to pitch in might vary, especially when the market’s running hot. Some sellers may choose to cover only a small portion, leaving the retainer for the buyer to cover. Others may cover nothing.

Real estate brokers say they still don’t know exactly how the settlement’s terms will pan out but say they are confident that conforming will ultimately prove to be a simple adjustment.

“I’m actually excited to see what solutions come about,” Pitre said, adding, “and no more litigation.”

— Andrew Miller covers business news. Reach him at amiller@oregonian.com or 971-803-2954.

Oregon real estate

[ad_2]

Source link