Will the National Association of Realtors anti-trust case lower home prices or commissions?

Published On: March 7, 2024773 words3.9 min read

Short answer, no.

Effect on home prices:  

According to the National Association of Realtors, FSBOs (For Sale By Owner) accounted for 7% of National home sales in 2023. The typical FSBO home sold for $310,000 compared to $405,000 for agent-assisted home sales. That’s a 30% discount, and typical commissions range between 5% and 6% nationally.  Statistically, selling by yourself is a bad idea.

Effect on commissions:  

Home Sellers have options; they can hire a realtor and pay a fee or they can do it themselves and save a bundle (maybe).  A Seller can list his/her home on Zillow for any price they choose, download a few forms and wait for the offers to roll in.  And of course a Buyer can purchase a home without a realtor, just fill out a few forms and get a mortgage, easy (not all that easy).  That said, most people believe that the sale and purchase process in California is complex, there are a host of legal and practical issues, which is why most people (93%) choose to hire an experienced professional to advise them.

If we agree it’s a good idea to hire a professional, how much is that advice worth, and who should pay? In California Sellers typically pay the fee.  Fees are typically based upon a percentage of the sales price, 5% is now common locally (2.5% for agent representing the Seller and 2.5% for the agent representing the Buyer) but fees are negotiable.  Discount real estate firms have been around for years, but they never really caught on in California.  People wonder if discount fees correlate to discount advice.  For example, you can hire a lawyer for $1,000/hour or another for $200/hour, will you get the same result?  Will the more expensive lawyer draft a more compelling argument that causes the opposing party to settle, maybe.  Would a faster settlement save you money, yes, but is it enough to make up the difference in fees?  It’s impossible to know.  

So you hire an experienced Realtor you feel comfortable with, and he negotiates a great price, acceptable terms, steers you away from pitfalls, addresses the challenges, skillfully handles the transactional details and keeps you informed every step of the way.  Perhaps the agent negotiates a $10,000 higher sales price for the Seller, or saves the Buyer from a $10,000 repair, or saves the transaction from cancelation by calming someone down (this happens more often than you might think).  The savings would be real, but you still might have difficulty quantifying the value of the professional you hired.  Could you have done it by yourself and achieved the same result?  Maybe…   maybe not.

Let’s say the Seller hires a realtor to represent them and they choose to pay a Buyer’s agent commission (traditionally), agents with qualified Buyers will undoubtably beat a path to the home. If the Seller chooses not to pay a Buyers agents commission, agents have no incentive (or obligation) to show the listing to their clients.  In fact, the opposite is true, they’d likely choose to show their clients other homes, homes which offer compensation.  The typical real estate agent is 100% commission (no salary) and everyone needs to be paid for their time.  Will that Seller get offers?  Will those Buyers be qualified?  Will those offers be competitive?  How long will it take to sell?  Will the Seller ultimately save any money?  Maybe…

But we’ve got another issue, who represents the would-be Buyer if they show up without an agent?  Can the listing agent represent the Buyer as well as the Seller?  Technically yes, but this is where it gets tricky.  California licenses real estate agents and designates them as fiduciaries, and a fiduciary has the duty to act solely in the best interest of their client.  When the Listing agent signs a listing agreement with the Seller they swear allegiance to that Seller.  Can the listing agent effectively represent both the Buyer and the Seller, perhaps, but why would they take the chance.  California has an estimated 275,000 attorneys, all trying desperately to make a living.  Why would an agent assume additional liability by representing both parties for no additional compensation?  

And what about the Buyers?  Most Buyers are struggling to come up with the down payment and closing costs, the last thing they need is another fee…  so they may be tempted to go it alone (scary).  If the market continues to move in this direction the lenders (Fannie Mae) may be forced into financing the Buyers agent commission, not a horrible option.  In conclusion, I believe most Sellers are comfortable increasing the sales price of their home to account for the commissions, business as usual.  

Contour Realty

If you're looking for personalized, expert guidance in navigating your real estate journey, Contour Realty is here and happy to help you every step of the way.

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