National Association of Realtors Settlement: Business as Usual or Forever Changed?

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At risk of oversimplifying, the 30+ year industry standard in how buyer representation has been paid via proceeds of the sale is highly likely to change.

You’re Sarah, mother of three and a realtor. You love what you do. You love people and you love helping people into the “American Dream.” Sure, you think it’s corny every time you say that out loud, but you have seen lives change through home ownership and you work really hard at what you do. It’s Saturday, kids are out of school, the game is on, and you just sat down to enjoy your homemade salsa you just whipped up and RING (I know phones don’t ring anymore but go with it). It’s the Joneses. You’ve been showing them property for more than 14 months now, but this could be the one! Your brow furrows slightly as you envision the afternoon and bowl of salsa likely disappearing without your help, but you remind yourself they are the nicest people and they have the cutest dog. Your significant other gives you that look of “do you have to” while also nodding as if to say – I support you, go do you.

You’re the Joneses and you’ve recently relocated to Northern Arizona. Your home lender joked when they called it “housing-bipolar,” but it’s no joke – the highs and the lows, the excitement and the nervousness. Who would have known this was your second time purchasing? How are you supposed to remember the process eight years ago – it seems like the entire process with forms and apps has changed anyway. You much prefer the simplicity of most of life’s purchases. You walk into a store or jump online, prices are relatively stable, maybe a bit higher right now with this inflation economy, but you’re in luck – you found a coupon. You could even have something sitting in your Amazon cart for days as you decide if that’s the perfect new collar for the dog. Sarah has been great though; she’s been with you every step of the way as you’ve seen home prices soar and rates jump up to levels not seen since Forrest Gump was on the silver screen. You do sometimes feel bad on the weekends calling, as you know she’s got a family, too, but she always reminds you that the housing market doesn’t wait for anyone, especially in the highly limited inventory of Flagstaff’s island economy.

You’re the Andersons, long-time Flagstaff residents that are making that tough decision to move to warmer weather as you’re not sure how much longer you can really tolerate these winters. You’ve owned your home for 22 years now, brought babies home there and held graduation parties as they headed off to college. Your home is a place full of memories, it’s not going to be easy to leave. You did well in your Northern Arizona profession and saved diligently in your 401K, but your financial advisor continues to remind you about the sheer impact of your home equity to your retirement future. Between your savings and the proceeds of your sell, you feel confident that you’ll be able to continue a comfortable life in the more temperate climate you are heading to. Every penny counts though, and you feel only the upmost respect for Rosie, a longtime family friend and real estate expert who is going to help you get your listing on the market this spring.

Who wins in this scenario and who loses? Is a real estate transaction all about winning and losing? Is it about what’s fair? Who decides what’s fair? I wanted to start this article differently from most of the articles that have since come out after the mid-March National Association of Realtors lawsuit settlement. At risk of oversimplifying, the 30+ year industry standard in how buyer representation has been paid via proceeds of the sale is highly likely to change. Not from the standpoint that it cannot occur in that same way but in the transparency and mutual agreement between all buying and selling parties and their representation. My goal is not to catch you up entirely on the occurrences and actors. For those reading about this for the first time, do a brief Google search and come back to this article. At the time of writing, any real implications of both actual federal/state law changes as well as industry and consumer adaptations have yet to be seen and can only be speculated about.

There are more savvy buyers and less savvy buyers, there are fantastic realtors and lazy realtors, there are easy, fast deals and complex, drawn-out deals – the three perspectives in the introduction are just a small sample of the experiences in this industry. My objective in this article is to humanize the conversation and cause you to pause when you think how you will want to participate moving forward in real estate transactions. Do you believe the Joneses are better off without representation? Thinking about your own business agreements, how should Sarah, their realtor, be compensated? Should Sarah take on an attorney’s billing practices and either charge an upfront retainer and put their client on the clock for every phone call and showing? Should Rosie, the listing agent, use an attorney retainer model and simply take 33% of the proceeds (current average for taking on free work in that industry). Should Rosie advise her seller not to offer buyer agent compensation to make more money for the seller? Does that mean that they’re promoting lack of representation to the buyer? Does that disadvantage a significant segment of buyers that don’t have the seasoned experience through the negotiations to secure fair terms? Or should we turn the marketplace entirely digital and devalue human representation and expect buyers and sellers to come to mutual arrangements and work to fully understand the implications and legalities of their buy and sell along with the conditions, representations and warranties of these six- to seven-figure Northern Arizona transactions? Who wins and who loses if we work to rely on technology platforms for transactions vs. employing people in our community to help with our real estate needs? What value is that to a community that can support small business entrepreneurship?

Complex problems require complex solutions. Will transparency increase? Yes. Will that be a good thing? Absolutely. Will there still be real estate agents? Yes, likely fewer, but that’s not necessarily a bad thing. Will there be massive implications to first-time home buyers, underserved demographics, and low-middle class homeowners? Absolutely. Communities and the individuals and families within them are better off in almost all measures when home ownership levels are high and struggle when those levels are lower. My only hope is that we can work together for a mutual win to the whole with the ultimate aim of increasing affordable homeownership along with fair and reasonable practices to help our community into that American Dream. FBN

By Chris Hallows

For additional information or to schedule an appointment visit ChrisHallows.Benchmark.us or call 928-707-8572. The Flagstaff location is 824 W Rte. 66 Suite A-3.

Chris Hallows is the branch manager and senior mortgage advisor of Benchmark Mortgage Flagstaff.

NMLS 306345 Ark-La-Tex Financial Services, LLC NMLS 2143 |Equal Housing Lender

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