Ending the practice of the seller paying the buyer's real estate broker commission would result in harm to consumers already facing affordability challenges, commentators on the financing side of the transaction said.
"It's the type of thing that is going to have a lot of unintended consequences that are going to be difficult to predict from the outset," said Brendan McKay, the president for advocacy at the Association of Independent Mortgage Experts.
On Oct. 6, Anywhere Real Estate gave details of its settlement in the Moehrl and Sitzer/Burnett cases announced a month earlier. A few weeks later, rival franchisor Remax also settled. However, the cases remain active, with the National Association of Realtors among the defendants still contesting.
BTIG is "somewhat concerned" about eliminating the minimum commission paid to the buyer's real estate broker, a report from Soham Bhonsie said.
"The thought here is that both sellers and buyers are best served when the seller pays as it attracts the maximum amount of buyers to that listing, saving both parties time and cost," Bhonsie said in a report. "We don't see much change to how agent fees are paid (i.e. by the seller) at this point, as listing contracts presume that sellers will continue to pay the buyer's agent."
However, even though it has not settled, NAR changed its participation rule and no longer requires the seller to offer compensation to the buyer's broker, published reports said.
Consumer advocates argue that the practice of having the seller pay those charges helps to drive up transaction costs. But others say the switch could end up harming buyers.
"Especially if you're a first-time home buyer and maybe in the low-to-moderate income range, you don't have the funds available to pay for the real estate commission," explained Valerie Saunders, president of the National Association of Mortgage Brokers.
It will result in a lot more buyers not getting the services that a Realtor would provide to help them with the transaction, she said. And for buyers, the costs are likely to rise because of the items involved in the transaction that are no longer covered by the seller.
NAMB is not taking sides, said Saunders, a Florida-based mortgage broker and title company owner.
"We just basically have the popcorn," she said. "We're sitting on the sidelines watching to see what happens and then trying to figure out whatever the eventual outcome is and how it affects our borrowers, and what's the best way to handle it."
A percentage of mortgage brokers, especially in California because of its common licensing, participate in both the sales and financing function.
AIME also does not have an official position regarding this issue.
But for many in low-to-moderate and underserved communities, any dollar cost increase is going to have a massive effect on their ability to purchase the property, said McKay, who is also the owner of McKay Mortgage, Bethesda, Md.
"A real estate transaction is a big complicated system with a lot of people involved a lot of moving parts and frankly a lot of money," said McKay. "And changing one part of it is going to have a ripple effect on all the others that the people trying to make the change might not always be conscious of."
Offering the commission as a seller credit on a low down payment loan is problematic. The seller credit is capped at 3% and using it for the buyer commission would impact the ability to offset costs in other areas, McKay said.
The Veterans Affairs-guarantee program in particular will be affected by the shift on who pays the buyer's broker commission.
Under current VA rules, the homebuyer is not allowed to pay real estate sales commissions. This just becomes one more hurdle for active duty and veteran buyers, who in a normal market — let alone the current high interest rate one — getting a seller to accept an offer that uses VA financing, McKay noted.
A third major real estate operator, Redfin, made the decision to exit NAR in large part based on requirements around the buyer's agent fee, an Oct. 2 letter by CEO Glenn Kelman said.
"Since a Redfin-wide initiative to join NAR in 2017, we've paid more than $13 million in dues, in an effort to influence NAR to advocate for an open, technology-driven marketplace that would benefit consumers. We'll now explore other ways to advance those goals," the letter said.
Redfin said allegations of sexual harassment by the organization's president and others also contributed to their withdrawal from NAR.
