A multi-billion dollar lawsuit rocked the real estate industry across the country this week and while the headlines are touting the massive settlement, local realtors said the impact to the local market is hard to predict, but certainly years away from reaching regular people.
The National Association of Realtors was ordered to pay almost $1.8 billion in damages this week over accusations the organization’s policy of forcing home sellers to pay the commission charged to home buyers is a violation of federal antitrust laws.
An additional lawsuit has already been filed covering the entire country but local experts said how the local market might change is up in the air and how long those changes would take to reach California.
The consensus among locals is that there will be changes to the way commissions are paid, but any impact is probably years away due to the winding nature of lawsuits. However, the possibilities for a remapped landscape are as varied as who you ask.
Brian Maser of The Condo Experts said some of the players have already begun moving away from the National Association of Realtors and may try to form their own regional alternatives to the established listing services.
"The big companies like Zillow and Redfin, you know, have been struggling to compete with the Realtors because that’s where the bigger dollars are. So they charge fees to get on their websites and they try to bring the pool of everyone to them, so they can get a piece of that commission," he said.
He said that trend may accelerate.
"Redfin and Zillow, they’re going to try to grow their own services and really grab market share and be the leading source. That is one effect that we see, which puts a lot of pressure on us Realtors because we don’t know where to go. We’re trying to represent our sellers in the best light."
Fallout from the decision could include a reduction in the number of individuals working in the real estate industry if buyers become more discerning in their choice of Realtor due to paying their own bills.
Winston Cenac, Designated Broker with Bulldog Realtors in the States said reducing the guaranteed payments to buying agents doesn’t guarantee better outcomes for buyers.
He said that buyer’s agents bring value to the transaction in any number of ways. They may be vastly more adept at finding homes for sale that meet the client’s needs or they may be astute negotiations or have experience spotting hidden costs.
Those skills have value that is worth compensation and if that compensation were to decrease, clients would receive a lower quality of service. That, in turn, could cause buyers long-term problems if they were to overpay for a property or find themselves stuck with disastrous repair costs.
"The larger point is buyer’s (agents) provide a useful service and it’s very hard for a buyer to know in the beginning how good a buyer’s agent is going to be," he said. "The current system can really reward a good buying agent for performance," he said.
Maser said younger, less experienced or perhaps less qualified Realtors may find themselves forced out of the industry if they can’t convince potential buyers of their worth.
While avoiding poor quality representation is a boon to buyers, he said appropriately compensating a buying agent could be cheaper in the long run for home owners than skimping on commissions up front.
"You know the value we provide to our buyers and for our sellers is we know if you make a bad decision purchasing a home or you don’t do the proper due diligence can be a huge hit to you financially," he said. "You buy a condo, you buy a house, and you don’t have a professional person representing you that doesn’t know what they’re doing and all of a sudden now you are liable for a couple hundred thousand dollars of damages for the property you bought that you didn’t even know was going to come down the line in a year."
Local experts said that no matter what might happen down the line, the current status quo will remain for the foreseeable future.
Cenac said many professionals are still coming to grips with the ruling.
"They’re still trying to digest it and it is being appealed and we have said ‘look, if something is going to happen to affect the system ,we’re still 4 or 5 years away’, we don’t know the exact time but it’s pretty distant to most people," he said. "A few agents have asked us about it but most of the agent community is still trying to digest it because it’s pretty far removed from the way the system is working in California today."
matt@smdp.com
