A big change is likely coming to the way homebuyers and sellers pay real estate agents.
That’s after the National Association of Realtors last week proposed making it more common for home buyers to pay their agent’s fees and doing away with the mandatory 6% commission that's long been a standard. Historically, those fees have been paid by home sellers using proceeds from the sale. The change still needs to be approved by a federal court.
For more, we turn now to Tony Mecia of the Charlotte Ledger Business Newsletter for our segment BizWorthy.
Marshall Terry: So, what’s the backstory here? Why are we used to this system, and why did the Realtors reach this settlement?
Tony Mecia: Anybody who's ever bought or sold a house will be familiar with this system. It's sort of the way it has developed over time. I think you described it pretty well. Both the buyer side and the seller side are paid out of the proceeds that the seller gets when the house is sold. That's just sort of the way it's been for a while. There was a lawsuit over the last few years that alleged that it’s actually a form of antitrust violation because the buyer side is incentivized — because they're paid on a commission basis — to maybe have the price be higher, when the buyers obviously would like the price to be lower. This is sort of an unusual practice in buying and selling something. So, there was a jury verdict that found that this was a problem, and so then settlement discussions ensued in the National Association of Realtors reached an agreement with the plaintiffs. And so this will have repercussions throughout the country, including in Charlotte, as it relates to the payment of real estate agents for buying and selling houses.
Terry: So, is this likely to make houses cheaper in Charlotte?
Mecia: Well, that's the theory. You know, if you take some of the cost out of buying a house, if you take that 6% commission, which is fairly standard, and you drop that down, that money could be savings. You know, on a $500,000 house, 6% is $30,000. So you know, if you were to, say, pay only 3% commission, that would save in theory $15,000. So there could be some cost savings. I mean that's the theory, and we'll have to see how it works out in practice.
Terry: All right. You reached out to real estate agents in the Charlotte area to get their reaction. What did you hear?
Mecia: You know, some of them said they're maybe a little nervous about maybe not being paid as much, but it does seem like there will be some new, maybe creative, ways of paying real estate agents that we haven't seen in a while. The main question seems to be: how do you pay a buyer's agent? If you're buying a house right now, that agent is compensated after the house is sold but there might be more creative arrangements coming, like maybe a flat fee for services, maybe an hourly fee for services. They might be more like other professions, like a lawyer. Sometimes you want a high-powered expensive lawyer and maybe sometimes you want a less high-powered, less expensive lawyer. One of the potential downsides, local real estate agents said, is that for buyers who, maybe, are first-time homebuyers that don't have a lot of money for a down payment, the idea of having to pay their real estate agent out-of-pocket to look for a house could be a disincentive for them to buy a house. So, potential pluses and also potential minuses.
Terry: Let’s move now from buying to renting. You report average rents overall in the Charlotte metro area have dropped 2.1% from a year ago to $1,565 a month. Renters have a lot more choices given the apartment-building boom of the past few years, so what are buildings offering to lure new tenants?
Mecia: There are more deals now for, you know, a month's free rent or two months’ free rent, or maybe they're waiving certain fees to apply. Data from CoStar Group, which tracks real estate data, shows that over the last couple of years, the percentage of apartments that are offering those kind of incentives has gone up from about 10% to 36%. So, we're seeing that's becoming a lot more widespread.
Terry: Finally, you've been covering the financial struggles at Aldersgate retirement community. I understand the state is now making more information available online to help people researching continuing care retirement communities.
Mecia: Yes, we've been reporting on Aldersgate and some of the financial troubles with Aldersgate. These continuing care retirement communities have to file financial statements with the State Department of Insurance. It used to be that only the most recent one was online. But after the Ledger started talking to the Department of Insurance and they started looking at it, they said, well, it might actually be more helpful to have that information go back for five years to help consumers, sort of, understand the finances of places they might be enrolling in. You might recall, Marshall, that the Department of Insurance last year started taking a close look at Aldersgate and supervising its finances after it was having trouble paying some of its vendors and giving refunds to some of its residents. That's still an ongoing situation.
Support for WFAE's BizWorthy comes from Sharon View Federal Credit Union, The Original Mattress Factory and our listeners.
