Friday, March 29, 2024

Mortgage rates are stable, Buyers agency in jeopardy

The mortgage rates over the last few months have stabilized with the usual fluctuations in the market but a generally flat trend curve. Stability is almost as important as the rates themselves as buyers do not have to make rush decisions to try a lock a low rate. 

Recent legal matters based on a proposed settlement between the NAR and Federal regulators could lead to poor representation for buyers. Buyers may find themselves in a situation where they have to choose between paying an agent for their services or going it alone with the seller or listing agent. 

As is typical in these types of suits the plaintiff either doesn't understand the arrangement and purpose of the MLS or they don't care. In a nutshell an antitrust suit was filed against the NAR and it seems some of the plaintiffs accusations were true. But rather than simply fixing the problem this settlement is an egregious overreach and will ultimately end up hurting buyers and sellers alike.

There were apparently several areas of the country where the NAR had a fixed commission requirement for the buyers agent rather than a negotiable amount. If this is true and it seems like in some areas it was, then the antitrust suit on that charge has merit. The settlement however as proposed is likely to make things worse, not better. Here in Washington State for example, commissions have always been statutorily mandated as negotiable. We should not have to make any changes here. Yet we may have too. 

The idea of the MLS was to move away from the car dealership style of home selling that was rampant in the early 20th Century. People would go to a broker's office and look at houses they had, if they didn't like them they would go to another broker and so on. It was tedious and it often led to aggressive behavior by agents just like we see at car dealerships. The MLS idea was to have brokerages share their commissions with other brokerages. Under this arrange a Weichert Realtor could show properties listed by other brokerages such as RE/Max and still be paid for their efforts. The buyer was now represented with their own agent that at the least had a fiduciary responsibility to work in the best interests of the buyer. In Washington State it is not only a fiduciary responsibility it is a statutory responsibility. 

The plaintiff's claim was that the seller should not have to pay for the buyer's broker. That seems logical until you dig deeper. The seller is paying indirectly. The commission is solely the listing brokerages fee. The listing broker chooses to share it with another broker to help sell the home faster and for the highest possible price. The listing broker could keep the whole commission for himself and try to find a buyer on his own. In our county we have nearly 2000 agents. Why would I want to keep that property from those agents. They may have the buyer that loves the property so much they are willing to bid it up higher than any other buyer.

The seller agrees to pay a fee that is fully negotiable to the listing brokerage. The seller is not paying the buyers agent fee, they are paying the listing agent's fee. The listing agent is choosing to share that fee with another broker if they bring the highest and best offer to the table. How the listing agent chooses to use that fee is her business. She could donate the entire fee to charity, she could go on vacation to Hawaii, she can put it in her retirement account. It is hers to spend as she sees fit. Most listing agents choose to place the property on the MLS and share their fee to help get the highest price and best terms for their client. On the MLS the home will sell faster and for more money almost every time.

Feel free to reach out in the comments section if you have any questions about how agency works in the state of Washington. You can text "waloa" to 360-364-5621 to receive a link to the Washington State Law of Agency official pamphlet. 

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