How will house hunters find and buy homes, post-NAR settlement?

The proposed settlement will restrict how agents can solicit commission rates
in MLS databases

By JEFF LAZERSON | jlazerson@mortgagegrader.com | MortgageGrader.com | April 08, 2024

Article originally posted in Orange County Register on April 04, 2024.

The National Association of Realtors’ proposed antitrust settlement will end buyer’s broker commissions being communicated over the local Multiple Listing Services in the months ahead.

This seismic business shift is like the 100-year flood.

How are buyers’ agents going to be paid? Nobody works for free.

In case you missed the big news, the national trade group was hit with a class action verdict that said it was price fixing commissions. Instead of paying out a $1.8 billion judgment, NAR settled for $418 million and said it would prohibit sellers from offering compensation to buyers’ agents through a Realtor-affiliated home-listing database.

This creates a buyer’s conundrum. Below are some avenues likely to evolve.

Buyers’ agents will either call ahead to the listing agent to find out if a buyer’s side commission is being offered. The agents may require the buyers to sign an exclusive buyers’ brokers agreement.

The available inventory of homes for sale is as tight as a drum and has been so since the pandemic days. Locating a home to buy, and receiving professional representation, are important.

But signing an exclusive buyers’ side agreement, effectively locking oneself into one agent, may or may not be something a buyer will want to do. Buyers might commit if it’s a particularly sharp agent. Otherwise, why box yourself in? says the many buyers I’ve talked with.

Wealthy buyers can just pay their agents directly. Low-wealth buyers will be hard-pressed to come up with the down payment, closing costs, inspection fees and pay a buyer’s agent, say, 1% of the sales price or some preset amount like $4,000.

What other choices likely to evolve and become available to buyers are certainly a horn of plenty.

Online search engines and transaction platforms are sure to evolve. Think Amazon or Costco.

Buyers can arrange and/or agree to an à la carte menu of charges or hourly wages from licensees for services like tours, research, negotiating and the like.

Many buyers may go directly to the listing agent believing the listing agent will be more likely to accept an offer in which the agent doesn’t have to be concerned with the seller paying a buyer’s agent. (Regardless of the NAR settlement, some buyers already do this considering the tight inventory.)

Buyers can negotiate their own transactions directly with the seller. For example, a for-sale by owner or FSBO. Escrow companies routinely support FSBO transactions. At minimum, the buyer and seller need something written and signed. I’ve seen plenty of simply written agreements.

How do you find a home on your own? One way is to create a flyer explaining your wants and needs, who you are, your family, etc. Make 400 copies and start knocking on the doors in the neighborhood you are seeking. It’s a lot of leg work, but you’re likely to get some bites.

Buyers and sellers can always hire their own real estate attorneys to review and prepare documents, perhaps far cheaper than paying a percentage of the sales price to an agent.

Some mortgage loan originators or MLOs are also licensed real estate agents/brokers. Originating the mortgage and writing the real estate offer something of a double duty and certainly has the potential to evolve.

I would bet many real estate agents also will get their mortgage originator license as one way to get paid.

Freddie Mac rate news: The 30-year fixed rate averaged 6.82%, 3 basis points higher than last week. The 15-year fixed rate averaged 6.06%, 5 basis points lower than last week.

The Mortgage Bankers Association reported a .6% mortgage application decrease compared to one week ago.

Bottom line: Assuming a borrower gets the average 30-year fixed rate on a conforming $766,550 loan, last year’s payment was $273 less than this week’s payment of $5,008.

What I see: Locally, well-qualified borrowers can get the following fixed-rate mortgages with one point: A 30-year FHA at 5.75%, a 15-year conventional at 5.625%, a 30-year conventional at 6.25%, a 15-year conventional high balance at 6% ($766,551 to $1,149,825 in LA and OC and $766,551 to $1,006,250 in San Diego), a 30-year high balance conventional at 6.625% and a jumbo 30-year fixed at 6.75%.

Note: The 30-year FHA conforming loan is limited to loans of $644,000 in the Inland Empire and $766,550 in LA, San Diego, and Orange counties.

Eye-catcher loan program of the week: A 30-year jumbo at 6.375% with two points.

Jeff Lazerson, president of Mortgage Grader can be reached at 949-322-8640 or jlazerson@mortgagegrader.com. His website is www.mortgagegrader.com.

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* Specific loan program availability and requirements may vary. Please get in touch with your mortgage advisor for more information.