Local real estate agents discuss how lawsuit may impact the market

Last month, the National Association of Realtors, the organization representing more than a million real estate agents, ended multiple class-action lawsuits and agreed to pay out $418 million in damages to homeowner groups.

 

The settlement, subject to court approval, will reshape the rules on how real estate commissions are negotiated and disclosed on the Multiple Listing Service, known as the MLS.

 

Typically, the buyer’s and seller’s agents, who work behind the scenes to negotiate the sale of a home, split a 5-6% commission on the price of the home, which is listed on the MLS before any negotiation takes place.

 

Homeowner groups contend this type of set commission is built into the price of the home and does not allow for negotiations on how much agents should get paid before the home-buying process unfolds.

 

The new ruling, to take effect this summer, will no longer allow the seller to list the commission amount for the buyer’s agent on the MLS, which, in effect, will allow for more of those types of commission negotiations.

 

With many buyers and sellers questioning what this means for the marketplace here in the Lowcountry, Daniel Island real estate agents have offered their thoughts.

 

Jeff Leonard, president and broker-in-charge at Daniel Island Real Estate, said the new ruling may revise some business practices but believes experienced agents are prepared to meet any challenges that may arise.

 

“Daniel Island Real Estate and the real estate industry, as a whole, are still working to understand the implications of the NAR settlement and how buyer, seller and real estate professionals’ needs are best provided and served,” he said.

 

Tricia Peterson, owner of Island House Real Estate, said South Carolina has always provided clear listing agreements specifying the amount of commissions paid.

 

“Commissions have always been negotiable; it is up to the company you chose to represent you and what their commission policy is. People have always had the choice to use flat-rate and discount brokerages versus full-service brokerages,” she said.

 

“While it was always encouraged for buyers to sign buyer agency agreements prior to viewing properties with a Realtor, it was not always a realistic practice; this is now going to be a requirement.”

 

Peterson recommends buyers work with a trusted agent.

 

“For most people, buying and selling a home is the biggest financial decision they will make in their lifetime, so it would not make sense to not be represented or not have a full-service brokerage that is looking out for your best interests,” she said.

 

“Just like a financial advisor that is making money from your investments, Realtors are working for you and your investment.”

 

While the changes to the MLS will not start until July, Ashley Severance, owner and broker at Atlantic Properties, has already started to discuss the implications.

 

“In every market, there is a wide variety of fees, just as there are levels of service, competence, and marketing. There has never been an obligation for a seller to pay the buyer’s agent commission, but it is a practice that has worked well,” she said.

 

Severance believes the impact to home sellers will be marginal.

“While sellers might elect not to pay buyer agent compensation, it does not mean they avoid the economics, as buyers will likely write this into their offer. Most buyers will want the commission paid by the seller and incorporated in the home price which allows them to finance the amount over time.”

 

Severance said the MLS change could encourage buyers’ agents to negotiate their commission upfront or, if not, they might pass on working with a buyer.

 

“I believe it would be tricky for a buyer to navigate our luxury market without a seasoned agent. And seasoned agents are not going to work for free. Agents and firms who offer a lot of value in Charleston will not be impacted as much by this. Atlantic Properties is a concierge business, and our service to buyers and sellers does not stop after closing.”

 

Jacquie Dinsmore, a real estate agent at Carolina One, said the real estate business is always changing. She feels in the future, buyers and sellers will be focused on using agents that provide a value-added approach.

 

“Know what your agent is doing for you and agree to what that value means to you. As a seller, why would you want to now ‘cut’ a buyer’s commission? How is that getting the best agents and strongest buyers in your home?” Dinsmore said.

 

“I also think this is possibly a cut-your-nose-to-spite-your-face situation. The real estate industry has worked tirelessly for years to create fair housing and an equal playing field for buyers. If we go back to a wild, wild west mentality where there is zero commission standard or expectation, it will be very difficult for agents to create a transparent field of play.”

 

Longtime Lowcountry real estate agent Sally Castengera of Corcoran HM Properties said one of the biggest changes will be more upfront disclosures and honest discussions with buyers, sellers, and even prospective clients.

 

“In the past, you typically would see agents disclose the different types of agency upfront to a new buyer, but with these potential changes, we find that it will be extremely important to not only disclose the types of agency and what a buyer’s agent is, but also run through a ballpark cost estimate with clients at their price point, showing them the cost of an agent and discussing  the myriad of services that we can provide to them as clients.”

 

Evan Murray works with Castengera and said the change could affect new home buyers.

 

“First-time buyers are a lot less cash-heavy because they have not had the time in the market to accrue the equity, so with the seller paying both sides of the commission, it relieves one of the many costs inside of the transaction,” he said.

 

“With this change, the buyer may now have to pay that as well. And it will not change the price of the homes, as many are stating it will; the price of the home will be the price of the home.”