AriZona Real Estate insider!

In the dynamic world of real estate, change is the only constant, and the recent Sitzer | Burnett verdict has sent ripples through the industry, reshaping the way we perceive and negotiate real estate commission fees. Traditionally regarded as negotiable, these fees are undergoing a transformative shift, with sellers now placing them at the forefront of their criteria when selecting a realtor. In this evolving landscape, only a select group of top producers will wield the negotiation prowess to secure the full 6%.

Gone will be the days when meeting at a property for a viewing was the standard practice for home buyers. Instead, buyer agents will find themselves engaged in in-depth discussions over the phone or in person, delving into commission fees and signing buyer broker agreements before setting foot inside a potential home.

A significant facet of this transformation is the negotiation of the buyer broker’s commission even before the submission of an offer. This crucial negotiation seamlessly integrates into the contract, potentially becoming an additional point of discussion wherein the home seller may agree to cover the fee.

At some point, I envision financial institutions—lenders, brokers, and banks—adjusting to these changes too. They will explore creative ways to include these fees in loans, following existing practices that compensate mortgage brokers and banks for refinances, home purchases, and other financial transactions Unfortunately, they might have a standard commission fee paid, and it could be much less than 3%. The goal is to simplify the process and offer a clear experience for everyone involved.

For seasoned professionals, these changes may not come as a surprise. The practice of negotiating real estate commissions upfront has been a consistent element of the industry, with personal experiences ranging from negotiating as low as 3.75% to as high as 7%. Adaptability and flexibility have become essential skills in navigating this shifting landscape.

Let me put on my commercial hat… Commercial real estate practitioners, especially, have been at the forefront of negotiating commissions during the Letter of Intent (LOI) submission or even before a showing is scheduled. This proactive approach underscores the increasing importance of addressing commission structures at the earliest stages of a transaction.

As we traverse this shifting terrain, it is evident that the Sitzer | Burnett verdict (Including others and the GOP) has catalyzed a rapid evolution in the real estate commission landscape. Professionals who embrace and adapt to these changes will undoubtedly thrive, offering a more transparent and client-focused experience for all stakeholders involved in the intricate dance of real estate transactions.

As we gaze into the future of real estate commissions, the bottom line is clear: negotiation will become the name of the game for each party involved. Both sellers and buyers are set to engage in discussions to determine their respective agent’s fees. The sellers’ agent will skillfully negotiate their fee, while the buyers’ agent will navigate their own negotiations, attempting to secure their fee within the contract and ideally persuading the seller to cover this cost.

Lenders and banks are not exempt from this evolving landscape. I believe that once it’s all said and done, they will begin actively exploring ways to seamlessly integrate these fees into loans, a practice familiar in various financial transactions. This approach aims to simplify the process and enhance transparency.

For buyers, the impact is significant. They may find themselves in a position where they need to cover their agent’s commission fee out of pocket if negotiations do not lead to the seller shouldering this cost. Alternatively, the fee may be strategically added to the loan amount, streamlining financial aspects and potentially affecting mortgage terms.

I also believe it will make the process more challenging and annoying for buyers, as they will need to hire a realtor before seeing any home, similar to sellers hiring a listing agent. The days of reaching out to a realtor to show you a property without a prior meeting will no longer be standard practice. This change may particularly affect first-time homebuyers and those who are already tight on finances.

The wealthy and more affluent will probably still hire a realtor to help them buy, as they look to their realtor for advice, opinions, strategies, etc. Buyers can always go at it alone and simply work with the listing agent directly. However, it’s crucial to be aware that the selling agent represents the seller, not you, unless stated.

If you choose to go at it alone, you can also hire an attorney to handle the paperwork and oversee the contract for a fee.

From my perspective, these changes do not signal a substantial shift in my current practice. Negotiating real estate commissions upfront has long been a staple in my approach. However, it is apparent that the industry as a whole is witnessing a trend of agents reducing the standard 5-6% commission rate. As a listing agent, this opens up an opportunity to flex negotiation skills and potentially secure commissions higher than the traditional 3%.

In conclusion, the future of real estate commission fees will be marked by a nuanced dance of negotiation between buyers, sellers, and their respective agents. As the industry adapts to these changes, those who can adeptly navigate this landscape will not only survive but thrive in providing a more transparent and tailored experience for all parties involved in the intricate world of real estate transactions.

Disclaimer: The following content is purely an expression of personal opinions based on current observations. As of the present moment, there have been no notable alterations, and it is anticipated that no substantial changes will occur until the National Association of Realtors (NAR), the Department of Justice (DOJ), and any ongoing legal proceedings reach resolution. It is emphasized that the viewpoints shared herein are subjective and should not be construed as factual guarantees. Additionally, it is acknowledged that reputable professionals within the industry prioritize their clients’ interests and demonstrate a limited emphasis on commission-related matters.