Sellers , in turn , who don ' t fully disclose all known or potential home and environmental risks to their buyers may later be subject to multimillion dollar lawsuits related to mold , cracked foundations , leaky roofs , or toxic air from a nearby chemical plant . The seller ' s $ 300,000 home price sales gain later turns into a $ 1.7 million dollar loss after the $ 2 million dollar court judgment is filed for not clearly disclosing all known or potential risks .
The median U . S . home sales price is at or just below $ 400,000 . The average buyer ' s brokerage commission fee is 2.5 % or about $ 10,000 . A buyer who is selfrepresented may pay too much for the home at prices well above $ 10,000 and put themselves at greater risk for missing out on the disclosure risks that could later cost them tens or hundreds of thousands of dollars .
A future lawsuit against the seller may net them zero if the seller files for bankruptcy protection unless fraud can be proven . The buyer still may collect zero from a recorded judgment if the seller has no assets .
For more successful real estate licensees who can afford a rather large marketing and networking budget while controlling a high percentage of the listings in their region , how many buyers ’ agents will show your listing if there ' s no buyer ' s agent commission being offered by the seller ? Why would someone work for free and take on such significant risk for nothing ?
Mortgage brokers who hold a real estate broker ' s license like me could step in and write up the purchase contract , negotiate the seller credits , and bring in the money to close it . Yet , why would I want to double my workload if I act as the buyer ' s agent to collect no additional commission and significantly increase my liability risks ?
In many of my purchase deals , I value the assistance provided by the buyer ’ s agent more than any other professional .
Will home values be impacted by new agency regulations ?
The real estate sector represents upwards of 20 % of the national economy . For people who don ' t hold real estate licenses , they may still be directly impacted as future home inventory numbers possibly rise and property values start to decline . As foreclosures rapidly increase , these become the neighborhood sales comps that either hurt or help your home value .
Some in the media are claiming that this buyer ' s agency commission reduction or elimination will be very good for homeowners . Again , the average buyer ' s brokerage commission is closer to 2.5 % than 2.75 % or 3 %, yet I will increase it to 3 % for the average $ 800,000 home sales price in California to arrive at an alleged $ 24,000 commission savings for the buyer and / or seller .
If home prices fall just 5 % in California due solely to these massive Realtor ® regulation changes , that ' s equivalent to a $ 40,000 price reduction for the seller . If so , the seller is now losing $ 16,000 in gains ($ 40,000 $ 24,000 = $ 16,000 in total losses ) with just a 5 % reduction in sales prices in spite of paying no buyer ' s agent commission fee on a typical $ 800,000 home sales transaction . What happens if home prices fall 10 %, 20 %, or more ?
The rise in mortgage rates , insurance costs , utilities , and overall skyrocketing inflation rates will also inspire more homeowners to list and sell . Real estate prices are influenced the most by the old economic theory known as supply and demand , for better or worse .
As more and more residential and commercial property go underwater or upsidedown ( mortgage debt exceeds value ), how will buyers or sellers be able to handle the complex process of forbearance , preforeclosure , or short sale discounts on their own without the help of an experienced advisor ?
To learn more details from the perspective of the National Association of Realtors ®, here ’ s an informative post that ’ s entitled The Truth About the NAR Settlement Agreement .
Whether you ’ re in favor of this NAR settlement agreement or hate it , please research as many different sides of this topic to better understand how it may help or harm you as a buyer , seller , landlord , tenant , real estate licensee , or thirdparty professional .
MEET RICK TOBIN
Rick Tobin has worked in the real estate , financial , investment , and writing fields for the past 30 + years . He ’ s held eight ( 8 ) different real estate , securities , and mortgage brokerage licenses to date and is a graduate of the University of Southern California . He provides creative residential and commercial mortgage solutions for clients across the nation . He ’ s also written college textbooks and real estate licensing courses in most states for the two largest real estate publishers in the nation ; the oldest real estate school in California ; and the first online real estate school in California . Please visit his website at Realloans . com for financing options and his new investment group at SoCal Real Estate Investors for more details .
65