Love, Money + Real Estate #30
Realtors Settlement, Flying Concerns, and How Paris Supports Lower-Income Residents
Greetings! Welcome back. Thanks for reading this week’s newsletter.
Let’s start with the Realtors Settlement
This is the beginning of my syndicated column last week. I write the column with Sam Tamkin, a Chicago-based real estate attorney (who, in the interest of full disclosure, also happens to be my husband). Here’s a link to the column on ThinkGlink.com.
Is massive change coming to the real estate industry? It’s unlikely. Will sellers drop their listing price because they’re no longer responsible for paying the buyer’s side of the commission? Almost certainly not. Will it be cheaper for buyers to purchase a home? We doubt that, and it might even become more expensive.
Now that we have all that out of the way, let’s rewind the clock back to last week and the $418 million settlement in the class action lawsuit between the National Association of Realtors (NAR) and several large Realtor organizations and home sellers.
A federal jury found the National Association of Realtors and several large Realtor organizations guilty of conspiring to artificially conflate sales commissions. The $418 million Realtors settlement, to be paid out over four years, requires the National Association of Realtors to eliminate the offer of buyer’s compensation from their multiple listing service websites.
This verdict follows on the back of the $1.8 billion verdict in the Sitzer-Burnett case, which was handed down in October, 2023. It covered the same basic ground but had an even bigger award. The National Association of Realtors has said it will appeal the verdict.
We’ve been reading with bemusement all of the articles claiming that the settlement will change the way homes are bought and sold. In particular, we’ve watched pundits claim, strangely, that home prices will fall. That buyers will pay less. That somehow over a million real estate agents will give up their full or part-time livelihoods and disappear from the business of helping people buy and sell homes.
Given the more than 30 years since Ilyce started writing this column, and the 20+ years since Sam, a real estate attorney, joined her as co-columnist, this strikes us as living in the land of magical thinking.
Read the rest of the story here.
Realtor settlement: My questions
Why does anyone think this will lower costs for buyers and make housing more "affordable"?
Do we really think agents will agree to take less?
And if they do, will buyers (who are struggling to come up with cash for a down payment) be handed a bill for 2 to 3% of the purchase price? Or, will they have to finance the fee (and then pay interest on it as well)?
Am I missing something? I’d love to hear your thoughts.
More Real Estate News
According to Clever, the real estate data company, the No. 1 regret among home sellers in 2022 and 2023 was that their Realtors commission was too high.
Clever found:
Americans generally don't know the current commission structure. About 66% of non-homeowners — and 42% of home sellers — mistakenly believe that buyers bear the burden of their agent's commission fees.
Additionally, just 1 in 9 Americans (11%) actually know that the average commission rate is about 6%.
Today’s consumers view the current commission system as confusing and unfair. In fact, 55% of sellers — including 42% who used an agent — think agents care more about making a deal than about their clients’ best interest.
Additionally, 42% of sellers say they’re less likely to work with an agent if they’re unwilling to negotiate commission, and 55% believe they shouldn’t be obligated to pay the buyer’s agent’s commission at all.
In a hot sellers market, which we have been in for awhile, Agents don't have to do much work, but do have to pay some expenses, for which they do get a decent amount of commission.
What happens when it's a really slow market again and agents have to do a lot of work? (A certainty, at some point in the future. What goes way up must eventually revert to the mean.)
Also, what will happen to the MLSs? Will the Realtors collapse if brokers stop requiring agents to pay dues? Mostly, I just have a lot of questions at this point. Anyone have any answers?
Are Boeing planes safe?
There’s a lot of noise around Boeing right now. Including the announced departure of the CEO and several other C-Suiters.
One thing is clear: When you read about all these incidents, they do make you rethink how/why/when you travel.
Players in the airline industries are introducing links to tell people what planes they're flying. This allows them to search for flights that are not on planes they’d rather not fly on.
In May 2023, Barlays surveyed customers to see if they'd be willing to fly on a Boeing 737.
21% said they would never fly on a Max
Another 23% planned to wait a year or more.
52% said if given the choice between a 737 Max and another aircraft, they'd choose the latter. Other research confirms these sentiments - and that's before everything that's happened this year
Then there’s flight booking site Kayak, which has seen usage of its filter to deselect Max aircraft (models 8 and 9) during the booking process increase 15-fold since January, the company told CNN. The site introduced the filter in March 2019, after the Ethiopian Airlines crash. You Can Avoid Flying on Boeing Airplanes with This New Booking Tool.
Or, check out how to avoid flying on the Max 9, courtesy of booking platform Alternative Airlines. The platform has an entire page dedicated to avoiding Boeing 737 Max 9s, including a list of carriers that don't have any in their fleet.
To find this information, follow these steps:
1. Search for flights on the platform.
2. Once you've found a flight you're interested in, click the details button.
3. This area will list which kind of plane the carrier will be operating for your flight.
Have you changed plans once you found out which plane was assigned to the flight?
Public Housing: Could the U.S. Take a Lesson from Paris?
I loved this story. Paris actually sets aside a significant amount of money to buy and rehab historic buildings so that Parisians of moderate means can afford to stay in the city.
Because city officials feel that if local Parisians can’t afford to live and work in the city, the city will lose some of that je ne sais quoi that makes Paris so special.
Hot Reads from Best Money Moves
5 Key Insights About the Gig Economy in 2024
The 4 Best Benefits in 2024, According to Employees
Video: Using Technology in Financial Wellness Services
4 Ways to Support Employees Living with Disabilities
Thanks for reading this week’s newsletter. I’ll type to you again, soon.
Cheers!
Ilyce
I have always been interested in real estate since I bought my first house in 1995. Since then I have bought, lived in and sold 4 additional homes. Buying a home is a complicated process to the newly initiated buyer, but it gets easier as you move and buy other homes throughout your lifetime. Unfortunately, due to the economy we are currently in, and the effects of covid, moving will not be as easy going forward if things don't change.
With all that said, I've never understood why the seller is on the hook for a 5-6% commission, split between the buyer's agent and the seller's agent. No where else in the world of business transactions can I think of where the seller of a product, service, or used goods pays half the sales tax or any type of commission just for selling said product, service or used good. Example: I have sold all my cars myself rather than taking them to a dealership and getting pennies on the dollar for them. I never paid for the fee's that the buyer would pay at the DMV. I wasn't even asked to. That would be silly of a buyer to even ask. Example: I go to estate sales ocassionally. When I purchase an item or items at such sale, I don't demand that the seller (estate sales company) pay the sales tax on my purchases. That would be ludicrous, and of course I would not even ask them to because it's stated up front that you will pay sales taxes at estate sales.
My personal belief is that inflation over the last five or six decades has caused the price of housing to skyrocket. Salaries on the other hand have limped along at 3-5% over those decades barely covering or not quite covering the basics. This makes housing even more challenging for new buyers or move up buyers. As the price of housing has risen, and at the levels they are today for a home, isn't it about time to re-evaluate the 5-6% commission and LOWER it? Especially since homes today cost hundreds of thousands of dollars MORE than they did in the 1960's, 1970's , 1980's, 1990's, 2000's???
Why should the seller be robbed of another 3% of their equity? Why??
On a $500,000 home today the seller at 6% commission pays $30,000! to sell their house. If commissions were cut in half, to 3%, split between the buyers agents and sellers agent, on that same $500,000 home, the SELLER would pay $15,000. Quite a difference. But still a fair payday for both buyer and seller agents who would receive $7500. The average salary in America is $53,000. The point is that MOST people in MOST markets in America DO NOT make $7500 per month in salary. A good real estate agent should sell a home a month. That's potentially $90,000, or more based on the above example. Why is the real estate model still a 6% commission model? Who set it? Why do we have this monopolistic model with the buying and selling of homes?? Seems a bit elitist to me.
I'm really a simple person at heart. To me, the buyer should be responsible for paying their agent a 1-2% commission range or whatever they can negotiate, and the seller should be responsible for paying their agent a 1-2% commission range or whatever they can negotiate. Lower commissions would enable both parties, buyers and sellers, to meet their moving objectives without feeling totally robbed by the real estate agent monopoly of how real estate is bought and sold in America. Sometimes change is good. In this case, it's long overdue for change to benefit the customer!
The purpose is not necessarily to see housing prices drop, although that would be nice. Don't count on anything "returning to normal" now that covid is considered in the past and non relevant to a large degree. Inflation is here to stay because our gov't just can't stop spending money like drunken sailors on wars that have no bearing on the average American, and spending bills so stuffed with pork that it is udderly ridiculous. No, with covid-con, the globalists accomplished their goal and did their damage to America and the 5 eyes nations,i.e. the UK, Canada, USA, Australia and New Zealand getting 75% of those populations to roll up their sleeves and take the dna altering death shot. Pardon my sidebar here.
Back to real estate. Here's another reason why it makes sense for the seller to pay their realtor 1 to 3% commission and for the buyer to pay their realtor a 1-3% commission. When you go into the courtroom as the defendant, or the plantiff, you pay a lawyer to represent you. The plantiff pays for their own attorney to represent them and the defendent pays for their own attorney to represent them, that is, unless they are poor and the court will appoint them a defense attorney. The point is, you need to pay an expert ( an attorney in this case) for their expertise to represent you and your best interests. Regarding how real estate, buyers and sellers also need an expert to represent their best interests to sell or purchase a home. Someone long ago just decided that the seller would pay for both agents. Why? Did the consumer get a say so regarding this matter? No, they didn't. This is one reason why average people despise real estate agents, especially sellers. Realtors are elitists, and they really don't even do that much, it's not like they are an attorney too and can do all the legal paperwork. Like the plantiff /defendant example above, why is real estate transactions the only transaction where the seller gets stuck paying for the services of the buyer?? It's time that people revolt and just pull the plug on the seller paying the freight for the buyer. Heck, I had to save for 12 years before I could buy my first home. Younger folks have no concept of "sacrifice" to obtain large goals like owning a home. This heavy chain around the neck of seller has to be broken! It's not fair. Everyone in the room knows it's not fair, but the power players in the real estate world don't want what's fair. They like many others are just plain GREEDY!