How will changes to the real estate industry affect Wilsonville?

Will a settlement agreement between the National Association of Realtors and home-sellers precipitate sweeping changes to the industry or cause more modest adjustments?

After a Missouri court ruled last year that the NAR, Keller Williams Realty and Homeservices of America were liable for $1.8 billion in damages for conspiring to inflate commissions, the entities committed to changing their practices according to a CNN article. These groups decided to settle the case for $418 million in March rather than appeal it to a higher court and agreed to make changes to their practices as part of that agreement.

Rule changes resulting from this settlement are expected to take effect this summer.

Despite news articles framed around the end of the 6% commission and seismic changes to the industry, Wilsonville real estate agents have varying opinions on how the changes will affect them.

A more competitive environment?

Norm Miller, professor emeritus of real estate at the University of San Diego, told CNN that the agreement could be the biggest change to the housing market in over a century and could lead to a decrease in housing prices. And some say the changes, like not allowing the buyer’s agent to post their commission on listing services and eliminating the mandate that the seller has to pay the buyer’s agent commission, could lead to a more competitive real estate environment and one that could lessen costs for customers.

According to the CNN article, the changes could cause some agents to offer a flat fee rate rather than collecting a percentage of the home sales price — or they could offer a discount to the typical 5-6% rate agents have become accustomed to earning.

While Jennie Hill, owner and broker at J. Hill Property Group at Keller Williams Portland Premiere, Darren Piper of Green Group Real Estate and Roger Arndt of Windermere Bridgeport Realty Group expect some changes for real estate agents, they don’t expect Wilsonville home prices to be heavily impacted.

Hill and the other real estate agents noted that there was never a fixed rate that agents had to charge and commissions were always negotiable.

Specific changes for a buyer’s agent

One of the main adjustments brought about by the agreement, according to an article in Vox, is that the commission of the buyer’s agent would not be allowed to be predetermined. Sonia Gilbukh, a real estate professor at City University of New York, told Vox this eliminates the power of the buyer’s agent to guarantee they get a certain percentage commission based on the possible threat they could withhold showing a seller’s property to their client.

Until now, Hill said it has been common practice in Oregon and Washington for a listing agent to negotiate a fee with the seller and pay the buyer’s agent out of that fee, adding that this has been outlined in contracts and “always been very clear” so long as agents explained well and clients read the contracts.

Hill said that, out of the settlement, there will be uncertainty on how the buyer’s agent gets paid.

Currently, agents are not required to have a contract with buyer clients, although Hill and Piper both said they already use contracts. Hill said after changes from the settlement take effect, contracts will be required and they will have to outline what the seller’s fee will be.

“That is where this gets tricky, because the fee agreement will be between the buyer and the buyer’s agent,” Hill said. She added that because sellers may not feel obligated to pay the buyer’s agent compensation, it might be the buyer’s responsibility to pay their agent.

Arndt added that the changes could pose challenges to first-time home buyers, who may not have the money to pay their agent. He said most first-time buyers only have enough for closing costs and down payment.

Hill thinks the changes will be beneficial in creating transparency around how agents are compensated, but said the execution could make it difficult for buyers to have representation when purchasing a home.

“What’s concerning to me about that is (buying a home) can be a very stressful and confusing process, and not having professional representation, a fiduciary working on your behalf, puts home buyers and sellers at increased risk,” she said, adding that this is because the buyers may not understand the contracts they’re signing and may not be able to advocate for themselves.

How will this impact the Wilsonville market?

Hill, Ardnt and Piper agree that home prices in Wilsonville are unlikely to change as a result of the NAR settlement.

Piper thinks sellers are likely to continue to offer buyer agent commission, to put their home in the “most desirable position” and sell it at the highest price — at least during the transition period.

He said these changes were made in Phoenix, Arizona last September, and so far a strong majority of homes on the market are still offering buyer’s agent commission, and he anticipates the same will happen in the Portland area.

While Piper does not anticipate that he or his team will be significantly affected by the changes, he thinks agents who aren’t operating at a “high level” will drop from the industry.

Hill said there is still considerable gray area in how the changes will play out, such as how open houses will work with a contract requirement. She said no one can predict all the changes, but said some areas may be impacted more than others.

“I think in areas where we already have really clear contracts, and for professionals that articulate their value and communicate what the contracts mean and how we get paid really well, I don’t think it’s going to impact those markets as much,” Hill said. “But I think in areas like where these lawsuits initiated, where it wasn’t clear, then it will be a big change.”