Property
Changes changing the way real estate commissions are advertised and paid came into effect nationwide in August, and some people are hailing the “death of the real estate agent.”
There is no system for lenders to convert the buyer’s agent commission into loans. This means some first-time buyers may try to buy a home without an agent. David Ryder/Bloomberg
August 27, 2024 | 11:55 a.m
Less than two months ago, Joanne Cleaver sold her home in suburban Charlotte, North Carolina, for $725,000 in an unusual way: Facebook Marketplace.
She did not hire a real estate agent, but instead hired a lawyer to handle the transaction and refused to pay a commission to the buyer’s agent – a standard industry practice that for decades has resulted in a commission burden of around 5 percent, or 6 percent of the home’s sales price, to the seller , with fees split between the buyer’s and seller’s agents. Cleaver, 66, estimates she saved $25,000 in real estate fees, money she pocketed.
Changes changing the way real estate commissions are advertised and paid came into effect nationwide in August, and some people are hailing the “death of the real estate agent.” Like Cleaver, some people suggest that home buyers should simply pay a flat fee to an attorney to prepare the documents. No agent required.
It’s a scenario that many real estate agents feared would be the result of a lawsuit filed against the National Association of Realtors by a group of homeowners who accused the powerful industry group of creating an unfair deal between the seller and the buyer’s agents to have. For decades, fees paid to the buyer’s agent came from the proceeds paid by the seller to his agent.
Now the two sides are decoupled and people like Cleaver are doing it alone.
Although sellers can still pay the buyer’s commission, some sellers may not, leaving the buyer responsible for a portion of the commission. These are additional costs that could be particularly burdensome for first-time buyers who already have to come up with the down payment and closing costs just to afford a home at a time when housing costs are at record highs.
And unlike closing costs, which can be built into the loan, there is no system in place for lenders to also include the commission into the loan. This means that some first-time buyers may try to purchase the home without an agent.
But real estate experts warn that the list of things that can go wrong in a real estate transaction is long and that the downsides when they go wrong are high and financially painful, from discovering mold to discovering a faulty foundation to a termite infestation – all sorts of things that should be noted in an inspection report but are sometimes not detected.
Beyond potential problems with the home itself, there is a spider web of regulations and paperwork that both buyers and sellers must navigate, as well as the growing problem of title and wire fraud.
Cleaver is the first to point out that she’s way ahead of most people: As a former real estate editor for the Milwaukee Journal Sentinel and author of a book about real estate, she knows more about real estate than most. “I’m not a newbie,” Cleaver said.
Here are some points to consider before deciding to go it alone:
What is that?
While inspecting the three-bedroom she wanted to buy in Moreno Valley, California, Brenda Cea, a software engineer, discovered that there was a damp spot on the ceiling.
The seller initially refused to allow a roofer to inspect the property on the grounds that the appraiser had already conducted an inspection. Cea’s agent insisted and the roofer discovered that part of the roof was cracked.
“Personally, I urgently needed an agent. It was the first time I ever bought a property or anything big like that,” said Cea, 29, who sold the home for a low $500,000.
Before she moved in this spring, she also discovered that the seller had made off with the curtain rods. With the help of her agent Elena Flores of eXp Realty of Southern California, Cea forced the seller to pay for the roof repairs and give her a $500 loan for the poles.
More negotiations
Leaks, mold, pests, foundation problems and septic problems are some of the more difficult problems to fix, especially if the buyer is pressed for time.
Earlier this year, Brent Wofford, a real estate agent, helped a buyer living in Colorado negotiate the purchase of her new home in Arizona.
Their Colorado home had already been sold when they discovered a major problem with the septic system on the property.
“All of her personal items were in a moving truck,” Wofford said, and the buyer was charged a $1,000 per day storage fee if her furniture wasn’t dropped off at the agreed time.
Wofford negotiated that the seller would repair the sewage treatment plant. Next, he negotiated an “escrow hold back,” in which the lender agreed to the closing on the condition that the repairs would be completed later. The repair cost: $15,000.
If you do it alone, how do you do it?
When her daughter unexpectedly moved abroad with her four children, Cleaver was suddenly filled with sadness over the sandbox and play area she had set up in her backyard for her grandchildren.
She decided to sell the sandbox and toys online – a process that allowed her to become familiar with the scams that are rampant on Facebook Marketplace.
She eventually listed her home on Facebook. She vetted each potential buyer through reverse address lookups and by reviewing their LinkedIn profiles. She used the same closing attorney she used when she purchased the home, who made sure the buyer’s money was transferred into an escrow account.
She admits her hand was over her heart as she waited for the sale to end earlier this summer. It went through and she now lives in a condo in New Hampshire in a senior community.
While she jokes that she wants to point out in her obituary that she saved $25,000 by not paying a real estate commission, she is also the first to warn, “I would never recommend a first-time buyer do this themselves.” .”
This article originally appeared in The New York Times.
