Buffalo, N.Y. (WBEN) - The National Association of Realtors last week agreed to do away with policies that, for decades, helped set agent commissions, moving to resolve lawsuits that claim the rules have forced people to pay artificially inflated costs to sell their homes.
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There has been a flurry of reaction to the new policy ranging from serious concern to it's 'business as usual'.
"I think there's an enormous amount of misinformation out there," Peter Hunt of Hunt Real Estate tells WBEN. Hunt says it's business as usual as of now. "Many of the other news outlets have made some very inaccurate conclusions about what exactly is happening right now," he adds.
According to Hunt, what's fundamentally happening is the existing system where if you listed your home with a broker, the broker would make an offering of a portion of that commission to another broker, through mutual cooperation, and offer to pay the other broker, for bringing in a buyer. The new rules would require the buyer to cover the buyer's commission.
The net effect of all this is if you're a buyer of a house and paying your agent directly, that's not going to be mortgageable.
"In other words, if I buy a house from a broker, the listing broker has agreed to pay my company, for my services to sell that house. So in that case, the purchase price includes that amount of money," Hunt explained. "Now, if you extract that the buyer side of that commission, and it's being paid directly by the buyer, do you think the price will go down for that house? I don't think so. So now I've got to pay the full price for the house as the buyer, I've got to get a mortgage. But I can't exactly mortgage a commission."
Hunt says this will most harshly affect first-time home buyers. He adds often they're doing everything they can to put the money together for the down payment and closing costs.
"Now if they've got to pay a broker on top of that, that's going to be onerous," Hunt said.
John Leonardi of the Buffalo Niagara Association of Realtors says while some may try to go to the multiple listing sites without a realtor, one will be part of the process.
"You will always have a realtor in the transaction. We have so many requirements in the transaction, that you need a local expert to help walk you through both on the seller's and the buyer's side. The Multiple Listing Service will always exist because that's how the information is exposed to consumers, the other realtors in the marketplace, it gets the most exposure of a listing than just being on a regular website," explained Leonardi in an interview with WBEN.
Could this lower home prices?
"The only way I could see it possibly reducing the home price is that the buyer's agents will get compensated directly from the buyer and they will negotiate that together," says Leonardi.
Hunt believes the only way home prices will come down is if demand goes down.