Opinion: No benefit to home sellers is worth sacrificing first-time homebuyers

By BrokerOwner.net April 1, 2024 Housing News

The
recent

settlement
involving
the

National
Association
of
Realtors
and
major

real
estate
firms
revolves
around
the
practice
of
“broker
cooperation,”
where
agents
representing
sellers
share
commissions
with
agents
representing
buyers.
Proponents
of
the
lawsuits
argue
that
this
customary
practice
inflates

commissions,
and
believe
that
buyers
and
sellers
should
pay
their
agent
representation
separately.
However,
this
seemingly
innocuous
change
would
have
significant

consequences,
particularly
for
first-time
buyers
with
modest
incomes.

Broker
cooperation
has
historically
favored
buyers
because
they
don’t
have
to
come
out
of
pocket
to
compensate
their
agents,
however
the
buyers
of
today
will
ultimately
pay
their
fair
share
of
the
cost
when
they
choose
to
sell.
This
practice,
in
place
for
over
a
century,
supports
homeownership
accessibility,
which
has
been
a
national
priority
since
the
Great
Depression.

Sacrificing
first-time
buyers

Last
month,
the

Department
of
Justice
(DOJ)
weighed
in
on
the
lawsuits
by
issuing
a
statement
calling
for
the
end
of
broker
cooperation.
The
DOJ
believes
that
by
eliminating
it,

affordability
will
improve
for
all.
That
is
highly
unlikely. Last
year,

mortgage
rates
increased
from
3%
to
8%
and
home
prices
still
increased
in
most
markets.
Even
if
the
DOJ
and
the
critics
of
broker
cooperation
are
correct
and

commissions
do
go
down,
few
argue
that
the
benefit
will
go
almost
exclusively
to
home
sellers.

However,
if
buyers
are
required
to
pay
out
of
pocket
for
their
agent,
it
will
increase
their
costs
by
as
much
as
$12,000
to
purchase
a
median-priced
home
in
America. The
unintended
consequence
of
excessively
disrupting
the
real
estate
model
will
be
to
undermine
housing
affordability
for
the
very
families
that
need
the
most
help.
The
data
shows
that
that
more
than
80%
of
homeownership
gains
over
the
next
20
years
will
come
from
the

Hispanic
and
other
minority
populations.

Small
businesses
will
also
be
hurt

Homeownership
stands
as
a
quintessential
pillar
of
the
American
dream,
serving
as
a
pathway
to
the
middle
class
for
countless
families.
The
accumulation
of

home
equity
has
propelled
many
Americans
towards
financial
security,
with
homeowners
currently
sitting
on
nearly
$30
trillion
of
wealth,
according
to
the

St
Louis
Fed. Unlike
the
stock
market,
where
the
bulk
of
equities
are
owned
by
the
wealthiest,
approximately
87
million
American
families
benefit
from
homeownership,
contributing
to
a
more
equitable
distribution
of
wealth.

It
is
not
only
homeowners
who
have
benefitted
from
America’s
robust

housing
market,
so
have
a
slew
of
small
businesses.
The

real
estate
industry
is
not
dominated
by
a
handful
of
behemoth
corporations
like
most
other
sectors
in
our
economy,
rather
it
remains
primarily
the
domain
of
a
mass
of
small
businesses.

Real
estate
brokerages,
agents,
and
the
vendors
that
service
the
industry
account
for
a
substantial
portion
of
all
the
small
businesses
in
America. Ending
broker
cooperation
would
substantially
impact
the
500,000
real
estate
agents
and
their
teams
that
primarily
represent
buyers,
and
could
leave
inexperienced
homebuyers
without
competent
representation,
especially
in
minority,
and
low
and
moderate
income
communities

The
battle
is
far
from
over

On
Wednesday,
March
27,

CMLS,
a
trade
association
made
up
of
more
than
225
MLSs
in
North
America
took
a
hard
shot
at
the
DOJ,
asking
the
U.S.
District
Court
for
the
District
of
Massachusetts
to
accept
an am icus
brief telling
the
court
to
disregard
a
statement
of
interest
the
DOJ
filed
on
Feb.
15
in
a
major
antitrust
commission
case
known
as Nosalek.
This
battle
seems
like
it
has
a
long
way
to
go.

Ending
broker
cooperation
would
be
like
pulling
up
a
ladder
that
has
been
there
for
homebuyers
for
more
than
one
hundred
years. To
avoid
that,
policymakers
need
to
work
with
the
real
estate
industry
to
land
on
a
model
that
prioritizes
first-time
home
buyers,
ensures
they
have
adequate
agent
representation, and
allows
sellers
to
continue
to
pay
for
buyers’
agent
fees
without
disruption. Otherwise,
the
government
will
be
burdened
with
a
difficult
choice,
invest
substantially
more
in
tax
credits,
housing
counseling
and
affordable
housing,
to
support
a
reasonable
flow
of
first-time
homebuyer
activity
or
allow
homeownership
rates
to
plummet
nationwide.