A. There are a ton of articles on the class action lawsuit against the National Association of Realtors (NAR). Much of the main stream news unfortunately is blatant "misinformation". Since there is so much information out there, I won't play legal scholar here in this blog, but will try to give you what I believe to be an accurate as possible synopsis.
It has been a long standing tradition that when a Realtor collects a commission from a home owner for listing and selling their home, they give part of that commission to a cooperating broker, many times one from a different agency or firm.
The dispute arose because sellers of real estate were asking their listing agent, "If the buyer's broker represents they buyer, why am I paying their commission?" Some brokers may have been responding, "Because it is a requirement of our Realtor Association to offer a cooperating fee". This may or may not be the actual case because this practice varies by state and region. Here in the Capital Region of NYS, this has been more of a long standing tradition than a requirement. The concern focused on what are called “anti-trust” issues that brokers were colluding on price (commission) fixing. Since commissions were always negotiable, this was never the case, however NAR decide to settle the lawsuit to prevent their members Realtor Brokers) from getting sued.
Rather than go into all of the “ways it used to be”, I will sum up how it will be moving forwards. Starting in July of 2024, there will be no more cooperating offers from listing brokers to buyer brokers. All buyer brokers will be required to be paid directly by their buyers. This may come in the form of seller concessions, where the buyer asks the seller to contribute to the buyer’s closing costs. Buyer’s closing costs may include the buyer broker’s commission.
When in negotiations, a buyer, in order to pay their broker, may ask for concessions from the seller. The seller may decide to raise the purchase price in the amount of the concession, or they may not. It is all negotiable.
Although buyer’s may see this as a new, added expense, it in reality is not. They were always paying for the buyer’s broker to get paid as the fee comes out of the proceeds of the house for which the buyer is providing the money, their money.
The bottom line is the days of real estate agents showing homes without a contract in place for how they will get paid are over. The MLS will no longer be a portal where commissions and fees are discussed between brokers, and will strictly be a market place for homes for sale.
Matt
A. The short answer is, no, not always. There are other terms in a real estate contract that may be more appealing to a home seller than just price, such as the earnest deposit, financing, home inspections, and closing dates. Let’s review these real quick.
The earnest deposit, also known as a good faith deposit, is the amount that typically accompanies the offer, or is given shortly after an offer is accepted. This is meant to reassure the seller that the buyer has "skin in the game", and won’t walk away from the deal on a whim without consequence or financial penalty. This deposit is returned to the buyer when an item that came up in the inspection can’t be negotiated, or the buyer isn’t able to obtain financing as agreed upon in the contract. If the buyer does not have a legitimate reason however, the seller may be entitled to keep the deposit if the buyer tries to back out without good cause. If two offers are basically equal, the one with a higher deposit is better since it is easier for buyers to walk away from $1,000 than $10,000. This is especially true if the buyer waives their inspections, is paying cash, and has no other recourse to get their deposit back.
Buyer financing also plays a role. The most common types of payment for a house are FHA or conventional financing, and cash. Although cash is perceived to be preferrable, a substantially higher offer that is being financed can still be better than cash, since the seller is getting a certified bank check at closing either way. When the price is close or similar however, cash may be the better option since there is no mortgage contingency to fall through. FHA mortgages benefit the buyer since they require less money down, but they can present problems during the appraisal if the home needs certain repairs such as painting.
Home inspections are another term to consider. If you had an offer that was $5,000 less, but the waived inspections, would you take it over the higher offer? Sometimes it can be worth it to not have the hassle of haggling over items that are found during an inspection. One way to head off this problem is to get a pre-listing home inspection.
Finally, closing dates can play a role. If a homeowner needs to stay in their home for a longer period of time for whatever reason, an offer of less money, but allows the seller to stay in their home for an extra month might be worth it since they would be laying out that expense somewhere else on a short term rental until their next home is ready.
One more thing worth noting is the appraisal. During times of a seller’s market, when multiple offers can bid the price upwards, making an appraisal questionable, buyers who are willing to make up the difference between the appraised amount, and the price they agreed to pay can also be an important item to consider versus a buyer who won’t agree to doing so.
In conclusion, any one of these items, or a combination of them all, such as waived inspections and a cash offer with a strong earnest deposit may be a better offer than one with a higher price but with FHA financing, inspections, and a weak earnest deposit. Lean on your Realtor to help you decipher offers being presented to you to find the best one that suits your needs when selling your home.
Matt
Copyright © 2021 Maloney Realty - All Rights Reserved.