The National Association of Realtors (NAR) reached a settlement in the Sitzer/Burnett case and the decision has sparked discussion within the real estate community. Paramount Real Estate Services issued a press release to address the myths linked to the settlement and its potential impact on buyers and sellers.
Settlement Overview
Allegations of commission inflation prompted a Missouri court to scrutinize real estate industry practices. One key settlement provision includes terminating the public disclosure of buyer agent commissions through the Multiple Listing Service (MLS). Agents affiliated with the NAR will also be required to establish Buyer Service Agreements with clients, which adds new contractual requirements to the home buying process.
Addressing Misinformation
Paramount Real Estate Services refutes several common myths about the settlement. They deny inflation of commissions exists. The company expressed disappointment about a 2 1/2 hour deliberation on the matter. The settlement is expected to have no impact on property prices, which remain dependent on market dynamics. “Our MLS did have a cooperative model, the the minimum was as little as $1,” is its proof the NAR and MLS systems impact on home pricing is insignificant.
In response to allegations of agent commissions inflating the price of properties, Paramount Real Estate Services states, “The market determines the value of a home.” They are worth what buyers are willing to pay for them. This is often proved when a similar home sells ‘For Sale By Owner’ for a similar price to one listed by an agent. The market has never taken into consideration the commission amounts. A similar example is including personal property in a sale. Anything from appliances, tools and equipment, to animals left on a hobby farm; they typically do not increase the value of any home. Agents bring value in marketing, negotiating and protecting their clients.” Paramount Real Estate also refutes misconceptions about prices dropping because sellers no longer have to pay buyer agent fees or buyer brokers commissions. The company shares a reminder that standard commission amounts do not exist and states commissions have always been negotiable while emphasizing the actual factors that impact home prices: supply and demand, interest rates, inventory and the economy.
In addition, the idea that the settlement will result in an average savings of $10,000 is disputed because “buyers and sellers won’t be able to have it both ways.” Therefore, the company doesn’t expect home affordability to drop as a result of this settlement.
Paramount Real Estate Services’ Chief Concerns
While they brace for additional home-buyer lawsuits as a result of this settlement, one pressing concern about who benefits most remains: “The real winners are the attorneys who are reportedly making 30% of the settlement. This amounts to approximately $180 Million and counting.” In addition, low-income earners and Veterans are considered to be the parties who lose the most from this settlement: “It will be difficult for some buyers to afford all of their down payment, closing costs & prepaid expenses, and now their own agent’s commissions. Seller concessions are capped by all lenders so there is a limit to what sellers can contribute towards buyer fees. The Veterans Affairs currently does not allow VA buyers to pay their own agent fees. The VA will need to amend their lending policies in order to encourage homeownership for Veterans. Our Veterans deserve better.”
Conclusion: Looking Ahead
The settlement may open up a pandora’s box of buyer-initiated lawsuits since it represents a milestone in the ongoing evolution of the real estate industry. Paramount Real Estate Services’ interpretation of recent events sheds light on what the real estate industry can expect moving forward.
About Paramount Real Estate Services
Paramount Real Estate Services is an Oregon real estate company providing services to clients from their office in Salem.
