Chances are you’re already aware of the recent NAR ruling that has shaken up the traditional practice of sellers covering the buyer’s agent fees from the proceeds of a home sale.
We’ve been closely monitoring the fallout from this decision at Ritter Mortgage, hearing perspectives from agents spanning California to Connecticut and southward to Florida. It’s become evident that different regions are experiencing varied responses to the ruling, with nuances that underscore the complexity of its impact.
In Maryland, for instance, one county is witnessing a substantial 20% of listings opting out of offering to cover the buyer’s agent fee, while a neighboring county remains largely unaffected with listings offering the buyer’s agent fee as the standard. This discrepancy highlights the complexity of what is at play and foreshadows concerns about how the ruling’s ramifications will reverberate differently across markets and regions in terms of fair treatment and representation.
But before we get further into the impacts we are seeing and possible solutions, let’s consider what is driving the dynamics. Central to the divergent viewpoints surrounding this issue are two key considerations: whether current market values inherently include the buyer agent fees, and whether buyers and sellers perceive value in a buyer’s agent, for sellers, enough so to consider it of value to pay it.
Some argue that the longstanding practice of buyer’s agent fee of 3% covered by the seller implies that, when pricing homes, it was considered in determining market values. If this were the case, maintaining the status quo of sellers opting to cover this fee would be the logical course of action, ensuring pricing remains aligned with current comps without inflating costs for buyers and insuring professional representation for all parties.
Conversely, the premise of the ruling contends that the buyer’s agent fee has traditionally been subtracted from the seller’s proceeds and thus is not factored into market values, and many agree. If this is the case, this means the fee is not baked into current values, and the buyer’s agent fee really should be the buyer’s responsibility, and a point of negotiation of the overall offer.
At Ritter Mortgage, we recognize the complexity of discerning whether the buyer’s agent fee is reflected in current market values or not. Nevertheless, our focus remains on facilitating informed financing options, presenting options rather than imposing perspectives.
But to clarify, the custom of the seller paying the buyer’s agent commission has never been enforced by law. It is a custom that became an assumption, and soon it feels as if there is no option. With the amounts of money changing hands, it’s understandable why some people may question if a buyer’s agent is really necessary and how much they should be paid.
One person on social media suggested an hourly wage for discrete services, such as writing a contract. There are several issues with this though it might work in certain markets for certain properties. However, this does not take into consideration that the agent who puts in the work, and plays to win, usually does. Going without high quality representation can have consequences for highly sought-after properties and markets with multiple offers situations and inventory shortages. Additionally, most buyers are slow to warm up to buying a home and don’t want to pay for the expertise that may be important to their finding and securing a home right out the gate. Realtors work hard for their clients, offering their expertise upfront with no guarantee of being paid. I don’t know about you, but I wouldn’t want to pay an hourly wage out the gate for help with what they do if I wasn’t sure I would close on a home.
Perhaps not all markets will be affected equally, but many listing agents also express concern over being put in an awkward position with unrepresented buyers making offers on their listings. What responsibility do they have to them if the buyer doesn’t opt for dual agency. Will the buyer know how to handle negotiations and manage their purchase on track? Will they need help with parts of the process? This may lead to listing agents recommending offers with professional representation over ones that are not, the same way a larger downpayment is often considered a more qualified buyer.
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One pressing concern that arose from NAR ruling right away is its potential impact on veterans, who are typically prohibited from paying buyer’s agent fees and may not have the means to cover them upfront. While we anticipate policy adjustments from the VA to address this issue, uncertainty lingers regarding the specifics. It’s imperative to ensure that veterans are not unfairly disadvantaged in the housing market due to sellers’ reluctance to accommodate the VA rules.
Despite differing market interpretations and practices, another crucial immediate need is to address concerns about equitable representation for first-time homebuyers and those with limited or no down payment. This ruling has the potential to exacerbate disparities or foster an environment of unequal treatment.
Initially, there was speculation about utilizing seller credits within the offer price to offset the buyer’s agent fee, which would have been a nice solution for many. However, lenders swiftly voiced opposition to this approach pointing out that a seller credit cannot be used to cover an agent fee. Additionally, discussions have surfaced regarding financing options that effectively incorporate the fee into the purchase price, albeit reservations.
As mortgage professionals, our role is to empower buyers in their pursuit of homeownership. While the terms negotiated between buyers and sellers are ultimately their prerogative, we emphasize the importance of having dedicated representation throughout the purchase process for sellers and buyers. Just as you wouldn’t navigate a divorce without legal counsel, embarking on a home purchase without a buyer’s agent can be risky and complicated. If you have not already read our post Is ti worth using a buyer’s agent if it’s not free? , we recommend you do so. We also offer an information sheet regarding Buyer’s Agent Representation as a PDF if you are interested (download).
Whatever your perspective, the chances of a buyer falling in love with a house where the seller is not offering to pay a fee is increasing, at least while we are in a sellers’ market. This may change when housing catches up with demand. But for now, for buyers concerned with the prospect of covering the buyer’s agent fee, we are happy to discuss and present options, which may include our down payment assistance program tailored to low and no down payment buyers with purchase prices up to $600,000. With no income restrictions and flexible repayment options, this program may provide a pathway to homeownership without undue financial strain.
For others who simply want to know financing options, we can model that for you with a Total Cost Analysis (TCA) at no charge.
For more information or personalized guidance on navigating this evolving landscape, we encourage you to reach out to one of our Licensed Loan Advisors today to get clarity. At Ritter Mortgage, we’re committed to staying ahead of market developments with solutions and helping you achieve your homeownership goals, regardless of the challenges posed by shifts in market forces.
