How Are the New Real Estate Rules Affecting the Austin, Georgetown Market?
One month ago, the way homes were bought and sold changed due to the settlement of multiple lawsuits surrounding real estate commissions. When major disruptions occur in any industry, assessing the consequences, especially the unintended ones, always takes time.
Since the 1980s, realtors practiced what was known as a unilateral offer of compensation – which meant sellers were willing to offer the buyer’s broker a commission fee at closing. In other words, “I will pay you an agreed-upon sum of money if you bring someone to buy my house.” This predetermined amount offered was then published publicly when the seller’s agent listed the house.
Per the settlement, this is no longer allowed. Each side, buyer and seller, must negotiate their fees with their own agent.
What Changed?
Since the settlement sellers have asked, “Ivy, what does this mean?” My reply? Five things:
As a seller, you have the prerogative of negotiating with me regarding my services. You may also choose to compensate a buyer’s agent or not. It is entirely up to you.
Whatever you decide may now be negotiated by the buyer’s agent. For example, let’s say you tell me, “Ivy, we are not paying any commission to the buyer’s agent. Let the buyer pay them.” My response? “Because we are no longer permitted to publish your answer on the MLS (Multiple Listing Service), buyer’s agents will now contact me. “Is your seller offering any compensation,” I will answer, “No.” In turn, the agent may or may not show your home. Furthermore, if they bring an offer, they may negotiate their commission as instructed by their client.
Get ready to receive more documents than ever before. And be prepared for additional legal forms as we proceed through the selling process. The reason? The Justice Department has not rendered any final rulings. All of us in the industry are working in flux. On any given day, a new ruling by a different court can alter the process.
Be confident that I will shield you from as much stress as possible. Due to the numerous disruptions and misinformation swirling about, almost everyone in the industry is quite testy.
I will update you as we move forward. Weekly I attend several seminars. I am determined to filter out the noise and focus on the relevant details affecting my clients.
What About Commissions?
Due to the recency of the ruling, I do not have hard statistics, only anecdotal evidence.
For instance, KB Home CEO Jeff Mezger expected the National Association of Realtors ruling to reduce the number of commissions his company pays to buyer’s agents. This has not proven to be so. In fact, of KB Home’s total sales, 60% to 65% come through real estate agents who are receiving a commission from the builder.
Because I am licensed in Oregon and Texas, I’ve observed a difference in the two markets. In Oregon’s tighter market, I’m finding more sellers reluctant to provide compensation to buyer’s agents. In contrast, in the Austin/Georgetown/Round Rock market, where there is a higher percentage of listings, eager sellers are motivated to provide compensation.
Lastly, allow me to relate a recent conversation with a fellow Austin agent. “Ivy, four years ago, I sold a brand-new home in Georgetown to an out-of-state client. Two weeks ago, he called wanting me to list it. During my seller’s consultation, I began to review with him the many changes that have taken place. ‘Yes, yes. I know all about the changes and I do not want to pay any more commissions than I have to.’ When I tried to educate him on the pros and cons of the new guidelines, he cut me off. ‘No commissions.’”
“What did you say?” I asked.
“I politely stated, ‘You are under no obligation to pay a buyer’s agent any commission. And I am under no obligation to work for you. When I consider the price you want, the time, energy, and finances I must commit to list and market your home and you are not willing to budge on commission, I think it’s best for you to interview a different agent. Good-bye.”
Now What?
I wrote earlier, “When major disruptions occur in any industry, assessing the consequences, especially the unintended ones, always takes time.” As I process the pushing and pulling in courtrooms across the country, there is one major concern I carry. It is this: “Will the profession I care deeply about degenerate into a commodity-based impersonal cut-throat industry?”
Or will it still be plausible for a grieving widow to seek out someone who will patiently and thoughtfully walk her through an alien process with one goal in mind: to protect her and guard a very different future than the one she hoped for?
Will it be feasible for a young couple, holding their firstborn baby, to navigate a first-home process, fraught with financial turbulence, while attempting to trust their agent who might be more motivated to safeguard a commission than secure a right-fit home?
I also know this: as long as I practice my profession, I will serve people before I sell property.