The Value of a Buyer's Agent
If you follow real estate industry news, you've heard about a case called Burnett v NAR. This is not a post about the trial or my opinions about the outcome. It is just a case for the value of buyer's agents in a new reality where their future is TBD.
The judge ruled yesterday against the National Association of Realtors, among others, saying that they could not force sellers to pay a unilateral offer of compensation to a buyer's broker. Typically, agents representing buyers are paid their commission by the seller. This suit could change the way that buyer's brokers are compensated, or even get rid of buyer representation altogether. I believe buyers and sellers both benefit from the knowledge and cooperation of buyer's agents.
There is a lot more that goes into buying or selling a home now compared to a generation or two ago. Many more laws have been enacted that apply to real estate transactions that buyers and sellers are bound to whether they are aware of them or not. In addition, home prices are much higher now, even when taking inflation into account, than in the past. While purchasing a home has always been a huge investment, it is much more so now!
For first time home buyers, the knowledge of a real estate professional is invaluable. Many first time buyers may not be aware of loan options with low to no down payment, or neighborhoods that are up and coming. Without this knowledge, they may delay home buying, which as we know can be detrimental to their overall lifetime wealth building.
Buyer's agents benefit sellers not only by bringing buyers to their home, but by guiding that buyer to a successful closing. It's one thing to find a buyer who likes your house. It's another thing to get that buyer up to speed on their financing, getting the home inspected, and making sure they have all their ducks in a row to get to the closing table. The more you can have buyers viewing your home, the more likely it is that you'll receive multiple offers.
Some people argue that buyer's should pay for their agent if they choose to hire one. While this does sound fair, many buyers can't afford the additional fee on top of a down payment, inspection and appraisal costs, and closing costs. While closing costs can usually be financed into the loan, inspections cannot and Realtor commissions definitely can't either! It would significantly deter lower income and first time homebuyers from having representation, leaving them to fend for themselves or, more likely, keep renting.
In the age of a publicly available MLS, Zillow, and Opendoor, some question the value of Realtors. In my experience, the average person does not know what they need to know to become a successful home buyer or seller. We wouldn't pull out our own teeth if we had a toothache. We all remember what a disaster it was when we tried to cut our own hair during Covid! Why wouldn't we protect ourselves during what is most likely the largest and most complex financial transaction of our lives? My advice? Always hire a pro!