Buy a Home Now Before it’s too Late?

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cartoon of african american homebuyer scared

Forgive us for the clickbait title, but let us explain. Again, sorry, but this isn’t the latest gossip about some celebrity – we think it’s important information.

As you may have heard, the National Association of Realtors recently settled a lawsuit alleging that it had conspired to keep commissions high. The media has had a field day and we could link to dozens of headlines but we’ll just link to a few here, here, and here. You can read the actual legal case here.

Most of the articles are wrong, plain and simple. Like, factually incorrect. From reputable sources like the Washington Post, CNN and NY Times, which is surprising. But perception is reality in this world unfortunately.

The headlines are that realtors force people home sellers to pay 6% (not true). They also posit that now that home sellers know that this commission is negotiable (which it always has been), home prices will somehow decrease. Right. Because sellers will now suddenly say “I want less money for my home.”

Anyway, right or wrong, the perception from home sellers is that it is in their best interest to pay their listing agent a commission that is too low to be shared with a buyer’s agent. This would make it such that homebuyers have to figure out a way to pay their own agent if they want representation.

In other words, starting July 2024, agent commissions may be de-coupled; buyer pays their agent, and the seller pays their agent. We’ve already written about our thoughts about these lawsuits on social media and on our website so we’re not going to do so again.

The dust is still settling about how things will change and how long they will take to change. The truth is, nobody knows, it’s all speculation. However, it’s generally agreed that this will make things harder (less affordable) if you’re trying to buy a home.

illustration of home seller negotiating with agent

What Might Sellers Do

A certain percentage of home sellers will continue to offer a commission to their listing agent, for example 5%, that will be able to be shared with the buyer’s agent – perhaps 50/50, 60/40, 40/60 etc…

However, a certain percentage of home sellers will not offer enough commission to the seller’s agent to be able to share it with the buyer’s agent. It could be 10% of home sellers, 50% of them, 80%, who knows? But it will definitely be a greater percentage than currently exists today.

So say the seller decides to only offer 2.5% to the selling agent, that agent probably won’t share any of the commission with the buyer’s agent.

Therefore, if a home buyer chooses to be represented by an agent, it is now up to that home buyer to pay for said agent.

Could be a commission percentage, could be an hourly rate, could be a flat fee, could be a percentage negotiated in the closing costs, could be an extra amount tacked onto your home loan etc…who knows?

The industry is still figuring this out. But the bottom line is that it will likely cost homebuyers more money. So on top of the down payment and closing costs, plus higher home prices generally speaking, you have to pay even more fees.

If you’re a veteran trying to buy a home with a VA loan, you can’t. It’s illegal at this time unless the Dept. of Veteran Affairs changes their laws, which could take some time. How long? Who knows, but it’s a large bureaucratic dept so things may move slowly.

Let’s be more specific. if you’re interested in buying a home, and that home listing doesn’t offer compensation to your agent, and you still want to be presented by an agent, you may be out of luck after July when the law takes effect.

If the Dept of Veteran Affairs takes, say, 6 months to change their rules, then some veterans may not be able to buy a home until 2025. This scenario is unlikely in our opinion, and where there’s a will there’s a way, but we don’t want anyone to be caught off guard – especially our veterans.

illustration of black couple home buyers angry

Who Should Buy Sooner Rather than Later?

If, and only if, you were already about to buy a home in the next few months, you may want to consider pulling the trigger sooner rather than later. Talk to a lender and get with an agent.

We may all look back at this moment as an obvious opportunity to purchase a home before this law goes into effect in a few months. This is because most sellers are currently offering compensation to the buyer’s agent.

If you choose to use an agent, and you don’t feel financially comfortable paying for said agent, then why not take advantage of this window of opportunity where the seller’s agent is still sharing their commission with your agent? You may save thousands of dollars.

On the other hand, if you wait until the laws change, you will likely have to pay for an agent if you want one yourself.

You may also decide to avoid any homes that don’t offer compensation to the buyer’s agent because you certainly don’t want to pay for it. But this means that you may have even less homes from which to choose – 10%, 50%, 80%, again who knows, but it will be less. And there aren’t enough homes to go around as it is.

Also, interest rates might finally start to come down as the Fed indicated in their last meeting, which means more competition from buyers and higher home prices.

illustration of black home owners

Who Should NOT Buy Now

Anyone who isn’t financially or emotionally ready to do so. If you haven’t gotten pre-approved by a lender to see how much you even qualify for a home loan, that’s step #1.

If you aren’t thinking about buying anytime soon, then don’t. If you think that we have no idea what we’re talking about, or if you think that somehow all of this will lead to lower home prices, then don’t buy now.

If you’re an experienced and savvy homebuyer, agent, lawyer, negotiator etc…and you don’t use buyer’s agents anyway and go straight to the listing, then please ignore us and do your thing. No need to rush to buy.

If you’re relocating and don’t know the area, then don’t buy. If you think that market forces will prevail over law changes and things won’t change much, then don’t buy now.

We could go on, but you get the point. Don’t let us, or anyone pressure you into buying a home before you’re ready.

But if you’ve been waiting for the spring or summer of 2024, and you’re financially ready, then we think you may only have about 3 months left before the law changes, and it becomes even more expensive for many people to buy a home.