Misinformation and Clarification on the NAR news

Are you curious about the recent developments regarding the NAR lawsuit? Let me shed some light on this matter from inside my world of Real Estate.

The National Association of Realtors, along with several other brokerages, including Compass, has reached a settlement in this lawsuit. However, it's important to mention that the court's approval of the settlement is pending, a process that may take several months and could potentially lead to changes in the terms of the settlement.

First and foremost, it's crucial to understand that this lawsuit revolves around the principle of transparency within real estate transactions. It aims to ensure that all parties involved are fully aware of how agents are compensated for their services and hard work.

In the most common scenario, sellers compensate their listing agents and extend an offer of compensation to the agent representing the buyer. This arrangement is designed to accommodate buyers who often allocate most if not all of their financial resources towards their down payment, securing a loan, and covering other expenses associated with purchasing a home. This "accommodation" benefits both buyers and sellers as buyers who cannot afford adding to these homebuying costs may choose not to make an offer on a seller's property or even consider it if they also have to pay this additional fee. 

Imagine this scenario: A Seller has decided against offering any compensation to Buyer's agents when listing their property for sale. The buyer's agent informs their client that if they are interested in this property, they will need to budget for the additional cost of covering their fee. The seller's decision has effectively shrunk their potential buyer pool by causing some buyers to decide against seeing the home altogether, understanding that they will have this additional cost at closing. This results in fewer buyers viewing the home. The seller gets an offer from a buyer who has decided to move forward. The buyer writes into the contract as a condition of their offer that the seller will pay the buyer's agents compensation as "seller help". So after shrinking their buyer pool, reducing competition for their property, and as a result possibly not getting the best offer, they are now being asked to pay the compensation in the end anyway. Clearing the path of potential obstacles for buyers from the start guarantees that a seller will get the most offers and best price possible. After all that, I'd also like to twist your perspective here: in most cases, these agent fees are paid at the closing table out of the proceeds from the sale - unless the seller is upside-down on their mortgage and is selling the property for less than they owe (where the sale of the property won't cover all the closing costs), the money that is paying for everything - the house, the closing costs, and the agent fees, is actually coming from the buyer already!! When marketing your home for sale, it is important to be competitive with the local market. Just as you would look to the price a neighborhood home sold for, you would also take into consideration the concessions a seller has made in that sale. If you have ever had a CMA "Comparative Market Analysis" done for your house, you would know we don't just look at the final sales price of your neighbors and call it a day.

One significant aspect of this lawsuit is the revelation that many home sellers were unaware of their ability to offer varying compensation to buyer agents. This case serves to bring clarity to sellers across the United States regarding their options in this regard. 

Agent compensation should always be disclosed at the outset and this is accomplished with the Agency Agreement. It's noteworthy that only 14 states in the country currently have buyer agency agreements in place. Maryland however is one of the 14 and has had buyer agency for over two decades, so while this will be a significant change for many, it is not a change for us here in the DMV. Our buyer agency agreement has and will continue to spell out how buyer agents are compensated and this will not change. One of the outcomes of this lawsuit is the implication that the remaining states will need to adopt buyer agency to enhance transparency in real estate transactions regarding how buyer agents are compensated. This is a good thing for buyers and for also agents across the country.

According to the settlement agreement, effective from July 2024, NAR-affiliated multiple listing services will no longer state what the seller contribution is towards buyer's agent compensation within their system. Consequently, buyer’s agents will be required to directly contact the listing agent to ascertain if compensation is being offered. Buyers also have the option to directly compensate their  broker or negotiate for the seller to cover these costs at the time of making an offer. In addition, listings accessible to buyer’s agents cannot be sorted based on the buyer broker commission offered. In our market, buyer agent compensation is already not a sortable field within our multiple listing service so this is not something that has been practiced locally by agents using the MLS. Rest assured, we are committed to providing you with information on all properties that align with your needs and preferences.

Real Estate agents do not work for free. Buyers who are about to participate in one of the largest transactions of their lives should demand representation for their protection and at the same time should expect that those fiduciary duties and that representation on their behalf has fees associated with it. Real estate agents will be mandated to fully disclose that commissions are negotiable and not dictated by law. Clients must also be informed that agent services come at a cost. These are practices that reputable agents have been adhering to for years. Additionally, by law, agents will need to obtain a signed agreement before showing property to a buyer, ensuring transparency and clarity from the outset. A large portion of the population starts their search online before ever contacting an agent, so if you are starting your search to purchase property - find the agent you want representing you and sit down for that consultation right at the start. That way, when you find what you are looking for, you are ready to go with a plan to move forward.

Should you have any inquiries regarding these developments or any other aspect of the real estate process, please do not hesitate to reach out. I am here to assist you every step of the way. 

Falling Rates for the Spring Market?

 

Some Experts Say Mortgage Rates May Fall Below 6% Later This Year

In every conversation I have, it seems I end up discussing current mortgage rates and how it is influencing the market. One of the things I tell people to consider though is how lower rates tend to increase competition, which can change sales price. So when is the best time to buy a house?? When you find the one you want.

Still, mortgage rates are a topic of conversation so let's go there. There’s a lot of confusion in the market about what’s happening with day-to-day movement in mortgage rates right now, but here’s what you really need to know: compared to the near 8% peak last fall, mortgage rates have trended down overall.

And if you’re looking to buy or sell a home, this is a big deal. While they’re going to continue to bounce around a bit based on various economic drivers (like inflation and reactions to the consumer price index, or CPI), don’t let the short-term volatility distract you. The experts agree the overarching downward trend should continue this year.

While I don't believe we will see the record-low rates homebuyers got during the pandemic, some experts think we should see rates dip below 6% later this year. As Dean Baker, Senior Economist, Center for Economic Research, says:

“They will almost certainly not fall to pandemic lows, although we may soon see rates under 6.0 percent, which would be low by pre-Great Recession standards.”

And Baker isn’t the only one saying this is a possibility. The latest Fannie Mae projections also indicate we may see a rate below 6% by the end of this year (see the green box in the chart below):

 

The chart shows mortgage rate projections for 2024 from Fannie Mae. It includes the one that came out in December, and compares it to the updated 2024 forecast they released just one month later. And if you look closely, you’ll notice the projections are on the way down.

It’s normal for experts to re-forecast as they watch current market trends and the broader economy, but what this shows is experts are feeling confident rates should continue to decline, if inflation cools.

What This Means for You

No one can say for sure what will happen (and by when) – and short-term volatility is to be expected. Don’t let small fluctuations scare you. Focus on the bigger picture.

If you’ve found a home you love in today’s market – especially where finding a home that meets your budget and your needs can be a challenge – it’s not a good idea to try to time the market and wait until rates drop below 6%.

With rates already lower than they were last fall, you have an opportunity in front of you right now. That’s because even a small quarter point dip in rates gives your purchasing power a boost.

Bottom Line

If you wanted to move last year but were holding off hoping rates would fall, now may be the time to act. Let’s connect to get the ball rolling.

Why I Still Think You Should Buy That House, Even Now.

 

Invest in Yourself by Owning a Home

Are you wondering if it makes sense to buy a home right now? While today’s mortgage rates might seem a bit intimidating, here are two compelling reasons why it still may be a good time to become a homeowner.

Home Values Appreciate over Time

There’s been a lot of confusion around what’s happened with home prices over the past two years. While they did dip ever so slightly in late 2022, this year they’ve been appreciating at a more normal pace, which is good news for the housing market. And while looking at price movement over just a year or two can make you worry prices are usually this unpredictable, history shows in the long run, home values rise (see graph below):

 

Using data from the Federal Reserve for the past 60 years, you can see the overall trend is home prices have climbed quite steadily. Sure, there was an exception around the housing crash of 2008 that caused prices to break the usual trend for a time, but overall, home values have been consistently on the rise.

Increasing home values is one great reason why buying may make more sense than renting. As prices rise, and as you pay down your mortgage, you build equity. Over time, that growing equity gives your net worth a boost.

Rent Keeps Going Up Through the Years

Another reason you may want to consider buying a home instead of renting is the never-ending rent hike. If you've ever felt the pinch of rent increasing year after year, you're not alone. That’s because, rents have climbed steadily over the past six decades (see graph below):

By buying a home, you can lock in your monthly housing costs and bid farewell to those pesky rent hikes. That stability is a game-changer.

In the end, it all boils down to this: your housing payments are an investment, and you've got a choice to make. Do you want to invest in yourself or your landlord?

By becoming a homeowner, you're investing in your own future. When you rent, that’s money you never get back.

When you factor in home values consistently rising, plus the opportunity to get relief from never-ending rent hikes, homeownership can be a path to financial security. As Dr. Jessica Lautz, Deputy Chief Economist and VP of Research at the National Association of Realtors (NAR), states: 

“If a homebuyer is financially stable, able to manage monthly mortgage costs and can handle the associated household maintenance expenses, then it makes sense to purchase a home.”

Bottom Line

When it comes down to it, buying a home offers more benefits than renting, even when mortgage rates are high. If you want to avoid increasing rents and take advantage of long-term home price appreciation, let’s connect to go over your options.