NAR wants FHA to lower their MI to make homes more affordable, but the American Enterprise Institute thinks they should lower their commissions. Hmmmm…. Thoughts?
Comments
additional comments on "The AEI Suggests Lowering Realtor Commissions to Spur Housing"
Comments are closed.
Since real estate commission rates are set by the market and completely negotiable between the parties to the listing agreement, NAR has no role in making recommendations regarding reducing commissions. I am sure the AEI recommendation was made as an interesting counterpoint to the suggestion by NAR. Neither recommendation is the answer. We all know what will spur the market is jobs, and a sense of confidence in our economy.
The AEI clearly don’t know what the hell they are talking about. Reducing Realtor commissions WILL NOT reduce Buyer/Borrower costs at all!!! Realtor commissions are paid by the Seller! And Realtors set it up this way, to reduce buyer costs AND make buying a home more affordable!!! AND a side note: the CFPB made it illegal ( RESPA violation) for a Loan Officer to pay for ANY buyer costs, because THAT would be an “inducement to borrow.” Where do these people come from!!! Idiots!
The CFPB allows lenders to pay part of closing cost though market premiums on rates, this has been a long standing rule. What is not allowed is for a lender to state we will pay your closing cost as an inducement, the rule put in place an even playing field and a clear picture of how we the lender and loan officers are paid.
So please don’t even call this or point fingers at lenders when we have the smallest pocket book on the transaction, in fact the idea of loans is to break even at the end of the day and expect the servicing value to be the small margin we make.
As Realtors your commission went from the first 100,000 and then the difference (6/3%) to a flat 6% on total price, while the mortgage companies earnings went down and now capped by the CFPB along with the LO earnings capped in writing. While at the same time the cost to do business has gone up and may do so again based on the THRD requirements.
So it is far to all that the commission earned by realtors now be on the table under the same fairness to consumers rules.
What would have the most impact on housing affordability in our area would be the lowering of property and school taxes! In fact, there are towns and villages where sales are lagging because the tax hit is so awfully high that there is no way potential buyers can make mortgage payments work on a house they should be able to afford! Hhmmm, how to fix this? New York now offers towns incentives to abide by the tax increase cap – a great place to start, but in towns where the taxes were already exhorbitant, that does not really fix the problem for home owners or buyers.
As always… A very enjoyable, entertaining show… My questions is: does NAR include fsbos in their inventory data or just listings from realtors?
Exorbitant school/property/village taxes make more of an impact on affordability than anything else in my area. Although New York State has imposed a “tax increase cap” and offers towns and their residents incentives to stay within the established range, that does not fix a problem that was out of control to begin with. There are certain towns in my county where sales are lagging because the combination of monthly mortgage payment plus pro-rated annual tax payment knocks buyers out of the ballpark on homes they should be able to afford based on the price of the home. I also see the tax hit affecting the second home market (in our area, that is quite strong) – does not matter whether the buyer is high-end, moderate priced or low-end, the comments come in about the tax levels and folks back away.
Jajajajaja ! Brian please get that grin off of your face. They have gone after the stock brokers, the insurance people and we all know and feel the mortgage people. It's about time there was some equality in this world! Rob Chrisman told us this would happen in July of 2014 when he did an article on Uber Real Estate of Florida. Thanks for sharing!
BBB
In order for either of those options to affect the market at all, all buyers and sellers in the market would have to be willing to just “lose” that extra money and leave it out there since a reduction in either cost would usually benefit one client or the other. The market sets the price of homes and the market is whatever price a willing buyer is willing to pay and a willing seller is l willing to sell at. People not using a realtor at all and selling to a cash buyer still most of the time look for market price.
So they want us to collude to lower commissions ?
Isn’t there someone out there watching for collusions?
Hilarious. Housing will be more affordable to the buyer if the real estate agents lower their commissions.
Now think about it. You have a $250,000 home that is a rock solid $250,000. Buyers are lined up to buy it for $250,000 and the agents on both sides have lowered their commissions by $2,500 or $5k total.
What seller of their property is going to "give" any buyer that $5k sayvings?
Someone who works with the AEI?
The reality is that sellers and buyers will naturally end up at market value almost everytime.
exactly!
I agree!
Mary McCarthy , couldn't agree more. Job creation, is the only solution! Texas Working Realtor, Rose Riggan
What I feel is raising the price of homes is the buyers being told they have to have the seller pony up for closing cost. Not commission. So folks now have to raise the price of their home to cover that cost.
Commissions are negotiated between the Seller and listing agent at the time of listing. I personally give ‘commission breaks’ to my Sellers if they are also using my team to find their new home. Sellers pay the commissions, not the buyers. If I give my Sellers a half point or a whole point off commissions, who do you think its going to benefit?? Not the buyer! Market value is driven by the market and currently, we have low inventory. How bout we ask the people at the AEI to work for FREE, with NO Benefits, pay monthly marketing, business and brokerage fees out of their own pockets, pay taxes and insurance, and then, only then, when they have something that finally pays off, ask them to ‘cut’ their hard earned money. I get so tired of people thinking agents make soooooo much money from commissions when in reality that commission is going into a business, not all in the agents pockets.
Since, the typical transaction involving FHA financing requires more time and effort than a conventional financing transaction. This is probably due to the lack of knowledge (hand holding on the Realtors part) by the typical FHA borrower. My firm has already made a push toward higher price point homes; simply due to the work required to complete a lower tier transaction. In a Realtor’s world, time is money. If, I can spend half the time selling a $500k home versus a $250k home which pays double the commission. I would certain focus on a higher price point (typically conventional type loans). While FHA buyers/sellers tend to be our bread and butter. A proposed reduction in commission would deter me and my firm from working with the buyers/sellers this idea is suppose to spur to buy homes. This would especially be the case with lower tier properties those below $125k. My firm has been flirting with raising our commission on FHA transactions before this proposal.
I think the buyer should pay part of the realtors commission. The buyers run realtors around in circles knowing that they dont have to pay them anything. They use multiple realtors at the same time and almost never disclose this fact.
The solution to this is simple. If you don’t have a good enough relationship with your buyer that they would do this to you, you really need to have them sign a Buyer Broker agreement, and if they won’t, then you can use your time going after a stronger client. I learned this the hard way in my early years, and now, while I don’t require most of my clients to sign it, if I have any doubt whatsoever, it is mandatory.
Maybe the AEI should lead by example and take a pay cut!
Maybe the AEI should lead by example and start by reducing their pay checks.
The concept makes sense in theory, but let's be real here. Say commissions get cut 2%. So now that starter home priced at $150k can, in theory, be priced at $147k. The $3k difference is going to suddenly make that home affordable for the first time buyer?
I disagree, you should just shoot the messanger here!
There are already several discount real estate brokers working on low commission. Some offering only 1% to a buyers agent. There are sellers who work with these discount brokers for a flat fee or very low percentage. So it’s not like there are no options out there for a seller who wants to list and wants to save on commission. If that was the answer these discount brokers would be wildly popular and corner the market. Instead they are nothing more than fringe players in the market.
Here is a link to the article in case anyone is interested:
http://www.aei.org/publication/how-a-real-estate-commission-cut-would-increase-housing-supply-and-lower-house-prices/
Commissions on govt owned foreclosures are already so low I can't afford to show and sell. The paperwork is enormous and the buyers are way above average in work involved. Net result–less money ard longer waits on the market to the government. Consider, a $150K house that needs work is offered at 2.5% Buyer Broker fee, that's probably half to the broker, that's $1,875. Not enough to pay to operate my car and to deal with difficult to finance buyers.
Commissions need to be 10% on lower priced property to get attention and action.
First, FHA is taxpayer backed entity, not private business. Second, Reducing commission to produce more inventory is not equivalent to reducing MI which makes homes more affordable. Even so, lets compare: $5,000 reduction in commission (purchase price) saves $21,73 per month ($245,000 loan amount vs $250,000. Reducing MIP 30bps on a $250,000 loan amount saves $62.41!
Dumb and Dumber! Smacks of things that lead to price fixing. I pale to think what would happen if I was stupid enough to call my area brokers and suggest we all RAISE OR LOWER our fees or discuss it in any way. NAR needs to nose out and work on some of the things mentioned below, especially JOBS! Scott B. and Dot, I agree!
Exactly, we don't have a rock solid set commision rate. Legally we can not set commision rates…
The problem is that AE1 has not thought out commissions in a realistic way.
for Example, an agent works 4 months selling a $200,000 home. The agents split is $6000.00. HERE IS THE OVERSIGHT! …….The agent worked for 4 months to earn the $6,000 which factors out to be $1500 per month. One must subtract about 30% from the $1500 to cover broker fees, taxes and selling expenses. Thus, the agent only netted about $1,000 per month on that sale. The agent better procure 3 or 4 of those sales running simultaneously or they will be on food stamps.
I agree Christopher.
NAR should lowers Realtors fees by half
Carol Neill – Dowdy Real Estate.
I agree with Dot. It's the job market that needs to change. The agents work way too hard to take such a cut in commission.
Common sense would show that, since the buyers do not pay a REALTOR's fee, it would have no impact on the housing market. Sellers would not be placing their house on the market just because the fee was lowered.
John Donahue ABR, CDPE, GRI, SRES
RE/MAX properties, ltd.
RE/MAX Hall Of Fame
REALTOR / Partner
30 Years Full Time Service
215-968-7423 / 7400
215-605-6532 Cell
How about everybody cut their fees by 1/3? Just kidding.
RE commissions are negotiable; just like the price… I can't tell you how many times I've adjusted my commission to make a deal work (or save it), and so have millions of Realtors. 🙂
Ok, you guys are FUNNY
Lower the Agents Fees does not change the Value of the Home, but does in effect Lower the COST to the Buyer (and Seller) that have to pay those fees.
In my area the standard Agent fee is 3% for each side of the deal. That means on a $300,000 sale the Agents each get $9,000. This is a total of $18,000 in fees on the deal to the Agents and the lucky Appraiser most likely got $450
If you lower the Agent fees to a MAX of 2% that would save the Buyer (and Seller) just 1% or $3,000 each for a total of $6,000 that could be used for the down payment.
BUT, most Agents would CRY that they just could not do this.
I don’t know why, I live in California and can live and work on that same $6,000 a month without any issues. Most Agents live in cheaper places that California and if not, then the price of the sales is even higher
I see Agents at every Sale that I do an inspection for one of my reports. As I still drive my 1999 Ford F-150 and am happy to do so what do they pull up in?
You know it. Caddies, BMWs, Lexus, Jaguar, Mercs or a $60,000 4X4 with $20,000 of tricked out add-ons.
It is the life style that the high fees they collect that they have wrapped themselves into that they will not give in on.
I say make the Appraiser on the same type of system. Make the Appraiser’s Fee based on a % of the Sales Price too. I would start at 1/4 of 1%. How would this look today? Well let us take a look
Today
$300,000 sale
$9,000 to the Listing Agent
$9,000 to the Selling Agent
$450 to the Appraiser
These cost on the deal, $18,450
If the Agents fee was 2% and the Appraiser fee 1/4 of 1%
$300,000 sale
$6,000 to the Listing Agent
$6,000 to the Selling Agent
$750 to the Appraiser
These cost on the deal, $12,750
This adds $5,700 to the pot for help with down payment or other fees that come into play like Section 1 and 2 repairs that no one expected
But it would help the Buyer and Seller in so many ways
No, forget that, Agents are there to help them
James, that makes zero sense. The math is simple….NO seller will accept lower than market simply to help a less qualified buyer purchase their place. That being the case, any drop in commission will 100% go to the seller net and not help the buyer in any way whatsoever.
Let’s assume the Appraiser fee is 1/4 of 1%. OK, I’ve got no problem with that. But to play by the same rules, we’ll also need to also assume that if the house does not close escrow, the appraiser does not get paid. Your may do 1,2 or 25 appraisals, using your gas, taking your time and still not make a dime. I’d love to make $450 guaranteed for every home I show.
Reduce commissions when everyone and everything already have their hands in our pockets? In my area, the average commission paid is 5% and split in half to 2.5%, so each side on the $300,000 sales price makes $7,500 gross. Now let’s break it down further because there are costs and fees associated with that. If you have a split with your office at 80%, now your down to $6,000 plus office administration costs let’s say $500 is now $5,500. Now you have to pay taxes on the $5,500 which is roughly 50% putting you at $2,750 and then minus any out of pocket expenses like gas, meals, marketing, time and maybe even that home inspections you said you’d pay for through escrow. The appraisers have already been screwed over by the system and now the system wants to screw us over. At least the appraiser always gets paid where we only get paid if the escrow closes.
Bryan, please spit out your dip before the recording…..It’s distracting. I love your show and thing your show is awesome!
Informative show! We only knew it was a matter of time before the RE Commissions were going to be on the chopping block. I doubt it will have any "weight" for the moment. And the Market already sets the commission anyhow, doesn't it. I see Multi-Million Dollar homes that certainly don't get paid 6% in total Comms. I also see Rural Properties that have 10%, 5/5, because of how hard it is to sell those. The RE Agents are safe for now, but that could change. Depending on which side runs the oval office does have an impact on the sentiment here. Lobbying by and to NAR is an ongoing item.
Lawyers don’t lower their fees, and they don’t work any harder than we do. Doctors don’t lower their fees, and again, they don’t work any harder than we do. They are paid,because of what they know, and knowing how to make that knowledge work for you. I have an attorney that works for me as a licensed Sales agent. She has said on more than one occasion that Realtors work harder than lawyers. I want to be paid well for my time, and my knowledge. And in turn, I get the highest price available for my Sellers. I agree that the answer is an increase in Jobs.
Why are home owners paying MI? The Banks and Mortgagees introduce a mortgage package with lower down payments to help buyers then charge an insurance premium to cover the lower down payment. MI doesn't cover the home buyer, it covers the lender. Perhaps the Lender should be paying their own insurance. I feel the same way about Home Owner's Insurance, I'll share that at another time.
RE: Commission
Licesned Real Estate Brokers and Sales people, (magic word 'Licensed') are bound by the State Laws, continually changing regulations by both State and Federal Agencies, continued education every two years and a strict Code Of Ethics. Maybe we should take a look at what qualifies those in AEI who think Realtor's commission is the answer to a better sales market.
FHA needs to allow homeowners who get to 20% equity to ELIMINATE monthly MI. Lowering real estate commissions isn't going to do anything to create more supply. BUILDING more housing units will create more supply. There are more people, so there needs to be more houses.
A property is worth what the market dictates.Scott has it right. What seller will give up any savings due to commission reductions?
I think its funny how all the comments here are focused on the idea of a commission decrease and not on the fact that the Treasury is STEALING MONEY and unnecessarily increasing the cost of borrowing money for new home owners.
Neather idea is a good solution. They are temporary solutions to the current problem. If any employer would suggest this across the board to their employees, they would loose their top producers…no question.
NAR does not or should not have the a broker. Agents who charge less money for their services already exist. They are poor negotiators! If they cannot justify their fees up front when listing, why would you trust them to negotiate a potential buyers offer. Fact, a home will sell quicker and for more money using the best Realtor you can find. That's why good agents should be justly compensated for their abilities. No more regulation please!!
How is that a solution to the price of homes, so now NAR should dictate commission in order to keep home prices down? Wow, what genius! Market and competition ultimately determines the price of a home. Isn't it considered "price fixing" for NAR to tell Realtors how much commission to charge sellers? Why not come up with a real economic solution to making homes affordable? Here's one: maybe all the billions of dollars being collected in lender fines should be specifically allocated to building/creating affordable housing stock.
How much of NAR and AEI are going to give up on their salaries to make this happen? If I'm taking a paycut, why not them also?
Pretty passionate responses. The fact of the matter, Realtors receive an obscene amount of commissions in the high-end markets for the amount of work they actually do. The mortgage guy gets maybe 1%, the listing agent two and half times that amount and then wants the mortgage guy to give them a kickback (illegal or not), for referring them the business in the first place. By far, the mortgage guy is far more instrumental in making a deal happen than the listing Realtor who simply waits for some other Realtor to sell their listing. I speak from first hand practical experience on this one folks.
Michael Blaser, you may only get 1%, but the total loan costs to the buyer are much higher than that, and that is money that the buyer must pay out of pocket, unless of course the seller pays it. Closing costs are by far a bigger hindrance to buyers being able to buy than commissions are, because commissions are in essence rolled into the loan. And not that I really want to nit pick anyone’s job because I respect what you do, but since you decided to call out Realtors, I’ll go ahead and mention that for your 1% you very likely never step foot out of your office, and if you are like 95% of the lenders out there, don’t work a minute beyond Monday through Friday, 8 to 6.
Maybe the reason there is so little inventory is because the many remaining wannabe home sellers do not have enough equity in their properties to sell their homes? That solution sounds like either continued home appreciation and/or making those monthly mortgage payments thereby reducing the loan prinicpal balance…both solutions taking time to realize.
Let the market make the correction…not more government intervention, pleease
Rose Riggan I totally agree if you have no job how can a person afford a home!
That’s a hysterical notion. My advertising costs are increasing, my association fees are increasing,as with everything else I am paying for and I am suppose to make less and still offer the same marketing and sales strategies as before? Wow!
Totally agree! Its all about jobs!
Great point!!
Really I think you lost your mind personally I wouldn't have a problem with it if buyers wouldn't jump around and have you do all the work and then hires another agent to do write up the offer. I don't think taking a realtor salary . cuz we barely make it as it is everybody is in our pocket so I think that personally that they need to figure out something but stay out of the realtor pockets . Are cut as short as it is. thank you very much
Yes, as I recall, hud homes sold so much quicker and for a higher price than other foreclosures offering less commission when HUD paid 5% to the buyer's agent. They had the right idea back then!
Neither solution is viable. We need better prospecting and ability to help sellers in motivation.
Quick question:
Of all the parties in a real estate transaction who has the least long term liability and “skin in the game”?
Your choices are-
Title company
Appraiser
Lender
Insurance agent
Real Estate Agent
2nd question:
Who on the list has the highest compensation in a real estate transaction?
Something seems to be out of balance doesn’t it?
The answer is, the people who bring the transaction to the table so that everyone else on your list can get paid. Realtor commissions are well earned.
You might want to back track on your comment. Maybe you work with lazy loan originators but not all originators are the same. 78% of business I close comes from advertising I pay for and not realtor referrals. I actually hand realtors qualified buyers!!! My realtors make twice what I do per transaction while I do 90% of the work to get the loan to closing. I’m not complaining because this is the profession I chose but I don’t think it’s fair for you to say your astronomical commissions are well earned when in reality you do very little actual work. Most listings sent to buyers are on an automated service and most realtors or real estate companies have assistants that handle a lot of the back end paperwork. You do spend time, gas, and money on advertising but look at the percentage you receive for that. Try to understand that you get the biggest piece of the pie and do the least amount of actual work. You need to remember that without loan originators there is no transaction. We coordinating everything with the people who have the “GOLD”(lenders)so your buyer can get the “GOLD” to purchase the home.
I always shake my head when I hear a lender compare workloads between themselves and agents. I don’t know you personally so I won’t make any assumptions, but 95% of LO’s never step foot outside their office, nor do they work a minute beyond M-F, 8-6. You also have a processor, an underwriter and others who help with your work as well. You can process FAR more transactions at once than any Realtor every could for those very reasons. You may only get 1% vs. 3% for an agent, but your companies total cost to the buyer is way beyond 1%, and is easily on par with agent commissions.
Hoping the DOJ gives them a ring about anti trust in setting rates.
So Realtors can't even discuss what our Commission Rate is between one another or that would be considered Colusion? But now the Government can tell you to reduce your Commission by 2% across the board and that is OK. And I'm sure that the Seller would simply reduce the sale price so that the home was more affordable to the Buyer……. Rrriighttt. The Commission has nothing to do with the Pricing of the property. I have never had a Seller say lets raise the price to cover your Commission. Price is determined by Supply and Demand. If Demand on a Product increases the price goes up. If Demand decreases price goes down. Sounds like more Income Redistribution to me.
Real Estate Commission is 100% negotiable. Since LO's are on Set Comp with lenders, when a deal starts to run into issues like on appraisals, reserves, cash to close, the logical answer to save the deal is to now start looking towards the realtors to cut the real estate commission buy doing a REALTOR REBATE to pay towards the buyer';s closing costs.
Google REALTOR REBATES and the first site out of 360,000 results is the U.S. Dept. of Justice website "Rebates Make Buying a Home Less Expensive." About 40 states allow Realtor Rebates.
Here's a thought. STOP fining Anyone and Everyone in the business of helping homeowners and buyers purchase homes . That will lower the [junk] costs of lending, making loans more affordable. More "QUALIFIED" loans = stronger housing market = the elimination of CFPB (you saw that coming right?) Let's focus on helping those who are QUALIFIED to buy a home …ummm…hmmm.buy a home. BTW. More good paying jobs would certainley fix this but that's pretty much out of "OUR" hands … Moral of the story. Too many Chiefs and not enough Indians – Lets get rid of the Chiefs !!!!! hint..hint.
BTW.. I EARN every penny of my commission. Can't say that about the knuckleheads making these wonderful suggestions to boost inventory
LO compensation has been regulated by our govt. for a while now. While our jobs are even harder because of all the govt red tape. What's the difference between them regulating us and realtors? People are worth what they're worth, not what the govt says they're worth. It's all BS. Subprime is what pretty much caused the crash. Not what people were charging in the industry.
cut commissions to realtors??? better watch out guys, they might cut your throats!
We have had more than one company in our area attempt to bring down the rates of commissions and none have ever succeeded. It is kind of like people who pay for expensive cars or purses to appear to be or to show that they are more successful. If you list your home with the discount brokerage, you give the market, your neighbors etc. the image that you only had money for the bargain basement company.
Well, you pretty much already have the FSBO marketing companies in place and they do okay but as for main stream real estate companies go, discount gives the impression of lessor quality agents and/or services and again a diminished image overall. It also gives the buyer the impression that if they need help with closing cost this seller may be cash strapped and unable to assist with closing cost so they will shy away from those properties marketed by a discount brokerage.
When these discount brokerages came about, we would show their properties but as it was, they were typically the homes in need of repairs etc., cash strapped sellers and because the brokerage was discount their ability to compete marketing wise etc. was diminished due to lack of marketing money available. Face it, if someone needs a cheaper brokerage, they are already out there and there are already FSBO sites to assist them so to use this logic, the AEI recommendation is ignorant of the fact that these companies already exist and don't do well in the long run or as well as main stream brokerage companies do. Image goes a long way in the business. As with everything else, that logo makes a difference in most cases.
Yep, in our area they are fee for services brokerages who take a small fee just to put the homes into our local MLS so yes, we do have their inventory if they paid to have it in our inventory.
Can anyone say "Price Fixing"?? Isn't there some Major Federal Law against that? Free Markets set pricing, until Government interferes, such as all the fees tacked on to FHA loans and other Government loans.
I think the difference is, in loan officer compensation government loans are often used and thus giving the government a say in how their loans are funded etc. Don't want the government in your business, don't do their loans is what they will say. Realtor's on the other hand, do not deal with government lending we simply market a product as do other types of advertisers to assist a seller of a product to buy and a buyer what to buyer and how to make it happen. Big difference.
Carol Dickey Roden-Lowe and without govt loans you wouldn't be able to sell those properties. All loans are govt loans nowadays. Capitalism is eroding, we will be a socialistic society if the govt continues to get their way.
There's no difference at all. You can't do your job without LO's doing their job. We are all in this together and are supposed to be working towards the same common goals. Our job is 10 times harder than it used to be but yet nothing is better. It's all red tape. But yet we are supposed to make less?
Larry I met with you in South Carolina and thought that you were more intelligent than this. First off cutting fees ( fee fixing would be a violation of the Sherman Anti Trust Laws). If the banks let the appriasers put a true value on the property than being told that the house is worth less than a buyer is willing to pay for it. I have multi office offers and a lack of good inventory. What we are fighting is the allowance of a Track builders that control financing tha require their attorneys , and their "affiliates " to do loans. Cockypop!! Want to know the true value of a home do not give the appraiser the contract but instead make a requirement and a large fine for not properly showing the "seller concession" . Not to give the appraiser a pre -detrmined value and the banks the control when they OWN 49.9% of the appraisal management. Economy here in Spartanburg and greenville South carolina is good because we have more intellligent politicans bringing business to the area. I have an appraisal background since 1979 had my CREA when it meant something! I feel sorry for the appraisers having to deal with the banks setting these rules for buyers. Not their fault. OPEN YOUR EYES!! GET RID OF THE AMC'S OR THE BANKS ABILITY TO OWN 49.9%. ANYONE REMEMBER WHEN AN APPRAISAL COST $250 BEFORE THE DODD FRANK?. A home is worth what a buyer is willing to pay for it!!. The mortgage end is only to determine the banks's comfort zone. We have several deals the sellers are rejecting because they are going through the Wells fargo's of the world with 5% down. Buyers will just have to have more steak in the game and the governmnet stop giving away everything to their self appointed targeted markets, thereby decreasing and stagnating values. Supply and demand means less inentory prices will go up. Tell the government to stop giving IRAN $250,0000,000, so they can build nuclear reactors and buy Plutonium without any recourse , CHASING OUT BUSINESSSES (such as ALcoa and a slew of good American Companies ) and do something for American values by letting the market appreciate. Get rid of current thinking that is in the Whitehouse!!!!!!!!!!! This is NAR's representative? GARY BIC, CREA, CRS, GRI.
FHA should create an MI scale based on credit worthiness. If the approved buyer is at the low end of the approval scale, then the MI is higher according to the increased risk. IF the buyer is stellar A+ then let them benifit with lower MI.
As for screwing with my commission… First – NAR has NO say over commissions. You cannot even talk about commissions as a "standard" or norm. It's illegal. SO, at face value, it's a dumbass suggestion. Second, lowering commissions will not lower sales prices – it will only increase the amount of money Seller's put in their pockets. It helps Sellers… and no one else.
Look – there are brokerages that advertize low commissions… and have been for years. And not one of those brokerages has broken into legitimacy nationally or otherwise (based on volume, number of agents or any metric I am aware of.) Ultimately, over the long haul, most professional realtors who have a viable AND professional business set their own commissions at or ABOVE what someone might consider the norm*. (*NOT ME – THERE IS NO NORM!) If commissions go down, it will be a response to the market, not some idiot telling us to do so.
Brandon Hays Lending has become ridiculous. I won a mortgage company as well and we only keep to allow a variety of products that no one else can offer. Banks through DEMS have been given too much control including the control over appraisals. Remember when frankk ad Brian told us that BArney Frank owns an AMC??I would like to know WHich ONE so we don't use it. GARY
This is stupid! NAR has nothing to do with the average commission charged in the USA. It is an agreement between broker and seller and it is set by the MARKET, as are housing values. And to suggest that NAR has any ability to alter commissions displays complete ignorance of the entire industry. My market, like most, is plagued with limited inventory. Just yesterday a purchaser of mine called on a 190,000 house, 1 day on the market and it received 5 offers. Regardless if the commission charged is 10% or 8% or 2%, the property is worth 190,000.
It's a bunch of BS. The entire industry is a joke. Hopefully a new prez will reverse most of the new laws. Some good has came out of the new regulations, but very little. Mostly very poor written laws. Good luck to you!!
NAR doesn't decide commissions – seller do when negotiating with their listing agent.
If you drop ther Realtor commission, the only thing that would accomplish would be to increase the owner's profit. But I can increase the owner's profit by INCREASING the Realtor commission. I'm an engineer and have written a program that analizes list price vs. sale price vs. DOM vs. Realtor commission. Interestingly, historically, higher commissions increase the selling price, closer to the list price, and shorten the DOM. For instance, a 6% total commission rate, vs. a 5% commission rate, increases the selling price by 2% closer the the list price. So let me see… a 1% increase in commission, makes the seller 2% higher sale price. The net results is a 1% increase in profit for the seller! In addition, 6% listings always sell faster than 5%. When you get to a 4% listing, it gets tougher to analise as more than half of the 2% listings expire.
Its all about marketing. Being an Engineer, I approach things a bit differently than regular people. I don't look at commission for what I make, or as payment for services, I look at it as what it does for the home I'm selling and the owner of that home. But, the fact that I make more money too it pretty cool!
As a clincher, look at all the REOs out there. Pretty much all of them offer a 3% co-broke. Why? Because they know what I've explained above. They make more money, and they get a Buyer's agent who is much more dedicated to making that sale work.
So go ahead folks… cut your commission, then I can clean up on the market!
DID YOU PICK UP ON THIS:
D.C. Circuit Panel Questions Constitutionality of the CFPB
Greenberg Traurig LLP
Greenberg Traurig LLP logo
Jennifer L. GrayMurray B. Silverstein
USA April 18 2016
On April 12, 2016, the Court of Appeals for the D.C. Circuit heard oral arguments in PHH Corp. v. Consumer Financial Protection Bureau, which challenges the CFPB’s imposition of a $109 million penalty for RESPA violations.
The case stems from a 2014 CFPB administrative proceeding alleging that PHH created a kickback scheme, in which it referred mortgage insurance business to mortgage insurers in exchange for entering into reinsurance contracts with PHH’s wholly-owned subsidiary, generating substantial revenue in the form of premiums. PHH argued that the premiums were lawful because it provided actual reinsurance services in exchange for the premiums and was exempt under RESPA Section 8(c)(2) (providing that payments received for actual services performed are not “kickbacks.”) PHH also claimed that its practices conformed to a 1997 HUD Interpretative Letter addressing captive reinsurance and Section 8(c)(2) of RESPA. An administrative law judge rejected PHH’s Section 8(c)(2) defense, concluding that the premiums PHH received exceeded the fair market value of the services performed, and imposed a $6.4 million penalty. PHH appealed to the Director of the CFPB, Richard Cordray. Cordray rejected both PHH’s and the ALJ’s interpretation of Section 8(c)(2), and held that to be lawful, payments for services must be “bona fide” — which he defined as not being tied in any way to a referral of business. Applying this standard, Cordray concluded that all of PHH’s reinsurance payments had been tied to business referrals and therefore violated RESPA. He also rejected the ALJ’s findings concerning the applicable statute of limitations. The ALJ had limited the CFPB’s jurisdiction to premiums associated with loans that closed within a three-year limitations period after the CFPB was created; Cordray asserted that PHH had violated RESPA every time it collected a premium since July 2008, even if the loan had closed years before that. Applying these parameters, Cordray ordered PHH to disgorge $109 million in past payments.
PHH petitioned for review by the D.C. Circuit, challenging the CFPB’s interpretation of Section 8(c)(2) and the applicable statute of limitations. PHH also asserted that the CFPB itself was unconstitutional. Several days before the oral arguments, the D.C. Circuit Panel requested additional briefing on the constitutionality issue, signaling that this likely would be a focal point of the oral argument. Indeed, at the oral argument, two of three judges that participated aggressively questioned the CFPB’s counsel about the CFPB’s structure, particularly the extent of authority vested in a single Director, which one Judge described as “very problematic.” The Panel also indicated concern with the CFPB’s willingness to jettison HUD’s long standing interpretation of Section 8(c), noting that the entire industry had relied upon HUD’s interpretation. Judge Brett Kavanaugh observed that the CFPB’s decision to “pull the plug” was “very problematic.” The Panel was also troubled by Cordray’s seemingly-arbitrary approach to the statute of limitations. Judge Kavanaugh observed that under its theory, the CFPB could impose liability for decades-old conduct. Judge Randolph asked why the standard reasons for having a set limitations period – e.g. difficulty obtaining evidence, loss of memory, etc. – did not apply equally here, forcing the CFPB’s counsel to concede that those reasons were present in this case and that he knew of no legislative history justifying the omission of a statute of limitations for administrative adjudications.
The Panel’s most heated questioning pertained to the structure of the CFPB, particularly that it is headed by a single director who is removable only by the President for cause. Judge Kavanaugh observed that it is “very problematic” that such a powerful official was able to make a decision that aimed to overturn a practice long seen by companies as acceptable. “You are concentrating huge power in a single person and the president has no power over it,” Judge Kavanaugh said. The CFPB has a “very unusual structure” that has “few precedents,” he added. The Panel’s aggressive and sharp questioning of the CFPB may indicate a willingness to declare that the CFPB, in its present form, is unconstitutional and to order significant structural changes, including potentially the elimination of a single Director at the helm.
An audio recording of the oral argument is available here.
I think that the point of lowering the RE agents fee is not the buyers will see a benefit, as there seems to be enough buyers but not enough sellers. Econ 101= home prices increase. The idea is that it will spur more inventory by enticing SELLERS to list as they will see more of a benefit ($$) to selling their home. Especially if they are close to the break even point.
There are and have been Brokerages with very low commissions. Most went out of business because they were deceptive and dishonest in comapring the "themselves to full service Brokerages". You get what you pay for! Low Commissions = lower quality of service and therefore dis-satisfied clients who now blame ALL Realtors.
maybe they need to get paid what the typical realtor gets paid before expenses and they would shut up and spend their time solving cold fusion with their massive intellects , nah
MLO's have been facing reduced income for a while, maybe it is time for the realtors to feel some of the pain
The AEI was one of the main architects of the Bush foreign and domestic policy. Just sayin'.
FHA has said they needed to keep their renewal (monthly) MI premium at 1.35% because they needed to replenish the insurance pool to reach Congressionally mandated minimums. They lost market share the Fannie and Freddie. Then they dropped the monthly premium to the current .85%. FHA volume picked up and the fund began to inch its way back up. Hm. Probably just a coincidence.
There is an important place for FHA in any lender's arsenal; it's just not the automatic go-to for borrowers with reasonable FICO scores (let's say 660 or better) and small down payments. An FHA borrower going after a $300,000 home will have a total monthly lower than for a 97% down conventional deal, but when you take into account the fact that conventional MI is cancellable after just a few years, the conventional deal starts to look a lot more attractive.
FHA has tried to make a case that there is continued risk of default even after the LTV reaches 78%, but I think that's bogus. If their MI were modeled after private MI, they'd be a lot more competitve–and the insurance fund would grow.
This nonsense about reducing Realtors' commissions is just that…nonsense. Funny coming from an avidly conservative think tank like AEI. Wonder how a laissez-faire advocating outfit would propose to get Realtors to drop their commissions when they're set by the market, not by law.
Amen Dot
its called conventional loan.
As much as I would really like to write what I am thinking when it comes to NAR, I will refrain because cursing out loud on the internet is in poor taste. Bottom line: Sellers are not going to reduce a price because of a reduced commission in a tight supply market. They are simply going to smile a little bigger all the way to the bank.
Great MI analysis!
Great comment by Dot Beckley below. In addition, lowering commission so more sellers list properties for sale, which would add to supply, which would make housing more affordable(lower prices). Huh, a seller on the fence trying to decide to sell or hold only cares about bottom line, which is net proceeds back to seller. We as agents negotiate commission all the time in order to achieve the goals of our clients. Using your thought process on MI, adding a bunch of inventory to the market would drive down home prices, which would cause any seller on the fence to hold off on listing their home, until prices come up to make it worth selling the home. What is going on is just small micro cycles within a larger cycle. These are natural cycles and will always work themselves out, when left alone. Trying too hard to control these cycles is what causes the melt downs, like we experienced years back. Thanks guys for always bringing about conversation!
JOBS…Good jobs! period!
Such a simplistic Straw Man argument
Love the idea! let Realtors have contracted comp, just like lenders! 2% of the sales price is WAAAAAY more than enough, considering the only marketing being done is an occaisonal open house and MLS listing!
they didn't succeed since full commission realtors wouldn't show the reduced commish listing…
As an appraiser, I don’t consider RE agents commissions as an adjustable consideration. So lowering the commissions would only help if it was market driven in the first place.
They should increase the Realtor’s commissions to 5%, as getting a real estate license is one of the toughest licenses to obtain, and involves so much blood, sweat and tears. How dare they try and lower their commissions!
You need to partner with better Realtors if that is all you see your counterparts in the RE industry doing. Our list of things we do is not only extensive, it's expensive and we get no assurance of a return on that investment.
What do I think? I think our Chief Economist has lost his mind! Perhaps if HE worked on commission his “solutions” would be caste through a more realistic lens.
Seems like any discussion of commissions would be in danger of anti-trust laws that we work so hard to avoid. Commissions are set and agreed upon between the parties of the transaction at the listing status and can be whatever is agreed by those parties and should not be set or directed as to how much or lower or such by outside parties.
I always knew we are important to the industry, but I didn’t think our commissions drove the real estate market. I don’t believe anyone should tell another how much he can earn and our fees are only a small part of the transaction anyway.
How about any idiot who recommends this has to work with buyers below $150,000 for a year straight.
No
One of the Main reasons we have so few sellers in Silicon Valley is Property Taxes. Most Seller cannot afford to move, because the home they have been in for more than 10 years has a lower Tax Base. If they want to move to a county that will Transfer that base then the seller could consider moving. But as fewer and fewer counties are participating that does not give the sellers many options. To stimulate the housing market.. Make it afforadable to move!! Allow Seller to transfer their property tax base to any county in California.
Who is the AEI? The American Enterprise Institute for Public Policy Research (AEI) is a conservative think tank based in Washington, D.C.[2][3] Its research is dedicated to issues of government, politics, economics and social welfare.
Founded in 1938, AEI's stated mission is "to defend the principles and improve the institutions of American freedom and democratic capitalism—limited government, private enterprise, individual liberty and responsibility, vigilant and effective defense and foreign policies, political accountability, and open debate".[4] AEI is an independent nonprofit organization supported primarily by grants and contributions from foundations, corporations, and individuals.
Really? "American freedom & democratic capialism? individual liberty". If this is truly what AEI stands for then they / no one can dictate what Realtors should/shouldn't set their commissions at!
What needs to happen to spur the economy is lower CEO pay. It averages 1,000% over 1950. In 1950 the average CEO's pay was 20 times that of the workers. Now it's over 200 times. Lowering CEP pay and spreading out the savings amoung the workers would put more money in consumer's pockets thus making them more able to buy homes. Here's the report: http://www.huffingtonpost.com/2013/04/30/ceo-to-worker-pay-ratio_n_3184623.html
It just shows you that there are people who have absolutely no idea how things actually work in real estate. Even some realtors don't know how it works, so I guess we should not be surprised. My main observance: there are plenty of "discount" real estate companies out there (just charge a fee and the seller pays the buyer agency commission – about 2% discount or more) that if cutting commission 2% would actually lure more home sellers to sell, then those "discount" companies would be absolutely flooded with sellers – but they are NOT. Hmmm … why not? Because that is NOT the answer … back to the drawing board …
I agree totally. Commissions are negotiable and the job market drives afforablility.
Commissions are set by the parties: Broker-Seller/or/Broker-buyer, no by any other person: Entity, attorney, lender, etc. Therefore creating this "propaganda" to damage and diminish our work is in violation to our rights.
Yun is a complete moron!!! I say that we ALL agree to reduce our pay by 33% if every single lender and all REALTOR personnel ( Staff nationwide that is) agree to the same pay cut! I mean since yun is an economist he can see that with REALTORs losing 33% of their proposed income they may not be able to pay their REALTOR fees that keep this moron employed. Why is it that the first thin everybody expects is us agents to take the hit while nobody else does? Yun is a Moron and this post proves it on more than 1 front. FIRE him.
Apparently this group does not understand what a commission is. When someone decides that they want or need to sell their home, and they don't want to handle all the advertising, showings and other details that go along with selling property, they turn to a licensed real estate professional to get the job done for them. The 2 parties decide on the fee that the seller will pay the real estate professional. It can either be a percentage of the sale price of the property or a flat fee. In turn, the real estate professional decides whether he or she wants to participate cooperatively with other real estate professionals in their area by offering a portion of the seller paid commission as a co-op fee. Again, it can either be a percentage of the gross seller paid fee or a flat fee. At each level, the fees are negotiable. Savvy sellers know that, when seeking out a real estate professional, they should turn to a Realtor with a capital R, which is a trademark of the National Association of Realtors. Realtors are professonals with continuing education, vetted forms and knowledge of their market. They also have access to the local multi-list service.
The National Association of Realtors has nothing to do with the negotiated fees.
It’s amazing that the ones doing the complaining are mostly lenders. Here’s an idea, go get your real estate license and start selling houses. To even think that the health of the market is based on commissions is absurd.
This is my job and I take it seriously. Should teachers, doctors and attorneys lower their salaries too?
How about lowering the grocerie store prices? Where would it end? Create more well paying jobs!
Has anyone ever worked opposite a low-cost broker on a transaction? Guess what happens? You get to do the work of both sides for no more compensation. The “bargain” broker will put the house in the MLS and have calls directed to the Seller. A limited representation brokerage is not your friend. In the crazy Austin TX market, houses go for 10k-20k above list. We have an inventory of 2.0 months, and even with lots of building, we are not keeping up with the inventory for new buyers. I think the NAR might do more good by trying to protect us from Zillow & Trulia than getting into a commission fight!
Well stated, agree with all, "no job…no home" JOBS are the solution.
Well stated, agree with all, "no job…no home" JOBS are the solution.
It's easy to give out someone elses hard earned money isn't it? How many times do we work for free, have you taken this into account? No sale…no money…simple! We are the only profession that gives advice, chofers buyer's around, showcase a properties multiple times, negotiate contracts etc. …etc… but if we don't sell it we do not get paid and if we spent money in the hopefull process…welll….tough luck! how would this improve home afordability people? think it thru!!
It's easy to give out someone elses hard earned money isn't it? How many times do we work for free, have you taken this into account? No sale…no money…simple! We are the only profession that gives advice, chofers buyer's around, showcase a properties multiple times, negotiate contracts etc. …etc… but if we don't sell it we do not get paid and if we spent money in the hopefull process…welll….tough luck! how would this improve home afordability people? think it thru!!
Personally, I no longer list bank owned properties for all the reasons mentioned. Also, I make every effort not to sell them either!!
NAR sets our commissions? News to me! I think that is a crazy idea to ask agents to cut commissions as a way to spur the housing market.
Not to be too political but isn't the AEI a "think tank" to promote ultra conservative values. Since the majority of NAR members tend to fall on that side of politics, the AEI is thumbing its nose at a major group of supporters. Not so smart…
It's ok for NAR to pay politicians $250K for a few minutes of conversation yet they want those of us, who are basically self employed, to reduce our commission. What reduction will NAR employees and AEI reduce their salaries to?
As others have said we set our commission it is not mandated so unless their exec's want to reduce their pay don't ask us to reduce ours!
AEI is the think tank darling of the political wing – theoretically they should support entrepreneurs. This is disgusting.
$150K in my town most foreclosures are $30 to $40k.How would you like the split on that?
This statement seem contrary to AEI's mission statement of to defend the principles and improve the institutions of American freedom and democratic capitalism…