Changes are coming in July in how Real Estate is bought and sold

After the DOJ settlement with NAR (National Association of Realtors) we will see large changes in July.The Department of Justice has decided to go after an industry where the average income of an agent is $40,000.  The DOJ has mandated changes will happen in mid-July. There is no infrastructure set up for Lenders, Title Company, the VA or Realtors to facilitate these changes. Many different industries need to make changes. Without Federal changes to VA and FHA loans, this new mandate would leave VA Buyers without representation.  Most of you know we find joy in creating those success stories for Buyers. This will mean we have to navigate the new world for our Buyers. If you are thinking of Buying or Selling this year, avoid the chaos and do it before July. We have been through many ups and downs in the 32 years we have been performing Real Estate. This is the biggest abyss of facts and information.   

Currently the Real Estate Sales have been set up in a manner to make the transactions successful. Fees were always put into the price of the house.

• Buyer’s no longer need 20% down like my Dad did back in the day. Private mortgage insurance was invented. Now PMI is a prepaid or monthly fee.
• Many of the fees involved in closing a house are now handled by the Escrow Company. I remember in the 1990s rapidly driving a check to the insurance company to get a receipt so we could close. Other fees were probably handled outside Escrow in past times.
• Title Companies purchase Title Insurance, Pay the Seller’s Property Taxes off to $0, Pay the balance of the Seller’s Mortgage, Pay the Buyer and Seller’s Real Estate agents the amount the Seller and Listing Agent agreed to at the time of the listing, sometimes pay the repair bills on behalf of the Seller.
• Buyer’s pay their down payment. 3 ½% and up
• Buyer’s closing costs in general usually amount to about 3% of the Sales Price.
• For the Buyer Title collects and prepay a few months taxes, pay all the fees from the Buyer’s Lender, pay Private Mortgage Insurance, pay the Appraiser, prepay 14 months of Hazzard Insurance, home inspection, termite inspection, sewer inspection.

The Department of Justice now wants the Buyers to pay their own Agent fees. If in mid July the ruling stands the Buyer will be paying their down payment, closing costs, and the Buyer’s agents’ fees. Does that mean the Seller makes more money or that the house price is reduced by the amount the Buyer’s Agent is now being paid by the Buyer? It is a new world to navigate.

VA and probably FHA Buyers will be harmed the most. A VA buyer is not allowed to pay certain fees which include a Real Estate agents fee.

Lenders, Title Companies and Realtors cannot move forward with how they are going to operate under the new rules that have not come out yet but will be in effect mid July. It takes time to have attorney’s write new contracts, IT companies to upload and distribute.

Our ratio of Buyers is always over 50% In all price ranges over the past year it has been common for a Buyer to ask for a Seller’s Contribution of 3 or 4%. Interest rates have been high and this allows for a Buyer to get a rate buy down for 1 to 2 years or replace flooring or help with the closing costs.

Patti equates it to the handling of Afghanistan. Decide to do the pull out and after the fact worry about the equipment and interpreters left behind.

Daily we are following the latest info on the impact of the changes. We will continue to attend classes and stay updated on the different changes that will affect the home buying and selling industry. We will continue to keep you updated as things progress in our newsletter, and you are always welcome to call us. We are always here for you.

If you are a fact checker, go to the link at the bottom of this newsletter for details. The article by National Association of Real Estate explains to members why they settled. “Ultimately, while NAR continues to believe that it is not liable for the home seller claims related to broker commissions and that we have strong arguments challenging the Sitzer-Burnett verdict, we decided to reach this settlement to put claims to rest for over one million NAR members and other parties who would be released under the agreement.” The bond needed for an appeal would have bankrupted the Association.

Monday 4-1-2024 we were in Brian Buffini’s class. Brian is a national trainer for the US and Canada. Brian was in the courtroom where this case was being heard and was on the stand for many hours. Brian has been in the business for 38 years. He does not know how this case ever got as far as it did. NAR Settled for $480 million dollars. The attorneys will receive. 33%. Or $158,400,000. 

National Association of Realtors information to the membership. https://cdn.nar.realtor/sites/default/files/documents/nar-settlement-factsheet-2024-03-22.pdf?_gl=1*h6nixz*_gcl_au*MTc4MzEwMTUyNi4xNzExNTcwNDEz