New Rule Change Could Be 'Worst Thing Ever' for Realtors And Great News For Homebuyers, With This Real Estate Stock Seen As A 'Beneficiary'
In a recent settlement, the National Association of Realtors agreed to change its rule so that anyone who lists a home for sale on any of its databases can no longer offer commission to the buyer's agent.
If the court approves the settlement, the rule change would take place in mid-July. This could bring about a future where the seller would no longer be paying for the buyer's agent, leading to more buyers being their own agents.
The changes would "decouple" the commissions owed to the buyer and seller agents, allowing more flexibility in negotiation, according to Stephen Brobeck, a senior fellow at the Consumer Federation of America.
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He estimates that over time, a home being sold for $500,000 would save $10,000 in commission costs, potentially lowering the price of homes being sold.
However, not everyone is convinced that buyers will benefit from the rule change, at least in the short term.
Lei Wedge, an associate professor specializing in real estate and investments at the University of South Florida, told Yahoo! Finance that "it's going to be worse for the buyer" because "buyers will [probably] end up paying more money for the home because now they have to come up with a commission to pay their buyer agent because this is a seller’s market."
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Even with those concerns, Wedge remains optimistic that over the longer term, it'll bring progress in lowering costs as "[in] the rest of the world, the commission to sell a property is 2% to 3% ... there’s no reason the average cost of selling a property in the United States is 5.49%."
Markets have already started to price in the prospect of a major shake-up to the commission structure that occurs in today's real estate transactions.
Before the settlement was determined, financial services firm Morningstar singled out CoStar Group Inc. (NASDAQ:CSGP), which owns homes.com, as a beneficiary, saying, "Homes.com should be largely unaffected from the direct implications of this lawsuit as it aims to monetize just one side of the transaction by selling advertisement products to enhance the exposure of seller listings on its platform."
Meanwhile, Morningstar argued that "real estate portals like Zillow and Realtor.com stand to lose the most from the impacts of this decision as they make most of their revenue by routing buyer leads to real estate agents that buy its advertising products. Since the lawsuit mainly targets the buyer-side brokerage commission, therefore it can have a significant impact on Zillow (NASDAQ:Z) and Realtor.com."
The stocks of CoStar and Zillow have diverged accordingly, with CoStar up about 18% in the past month compared to Zillow down over 3%.
Regardless of how the situation plays out, it's left those in the real estate industry with significant uncertainty. According to Belinda Tucker, a Realtor who owns a firm in North Carolina, the changes will either "turn out to be a good thing" or "could turn out to be the worst thing ever."
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