Dalton Realty, inc. has been a fixture on Whidbey Island for over 50 years. My name is Mike Dalton and I have lived much of my life on Whidbey. In 1978 I purchased Dalton Realty from my father and have seen many changes in the real estate industry since then. However, the changes going on now are changing some fundamental aspects of the industry as never before. These changes have been brought about by class action lawsuits against a national real estate trade group, as well as some major real estate organizations and companies.
Recent news articles, in print and on the internet concerning the lawsuits have raised questions about our industry. One major news organization recently published an article concerning the lawsuits and how it will affect the real estate industry, home buyers and sellers. It contained details concerning the lawsuit as well as opinions from experts from various related fields. I have copied (in bold) some of the major points of these opinions and stated my thoughts on each (in italics) These are my opinions, based upon 48 years of experience in the real estate industry, on Whidbey Island, and not those of any other individual or organization.
Critics say that Agents’ compensation (commissions) placed on local multiple listing services, led brokers to push more expensive properties on customers. (Our goal has always been to help buyers find a home that fits their wants, needs and budget, nothing more.)
A new rule by the national real estate trade group will require buyers’ brokers to enter into written agreements with their buyers. (By law, In Washington state buyers now must enter into a written agreement with a broker and negotiate to pay their brokers compensation. They can however negotiate with the seller, in an offer, asking the seller to pay all or part of it.)
An agreement reached by the national real estate trade group will effectively destroy the current homebuying and selling business model, in which sellers pay both their broker and a buyer’s broker, which critics say have driven housing prices artificially higher. (In Washington state sellers no longer must pay the buyer’s broker compensation, although they can make an offer of compensation to the buyer’s broker if they choose to. The market drives prices higher, or lower. Prices rise and fall as the market dictates, not by higher or lower broker’s compensation)
By some estimates, real estate commissions are expected to fall 25% to 50%, according to expert’s insights. (Commissions may fall that much for the seller, however there will now be a cost for the buyer.)
This will open up opportunities for alternative models of selling real estate that already exist but don’t have much market share, including flat-fee and discount brokerages. (With discounted services, “You get what you pay for” still holds true.)
Sellers are paying excessive brokerage fees, and those costs are passed on to the buyer, boosting the price of homes in America. (In my 48 years of experience only one seller has ever asked to raise the listing price to cover the commission.)
The national real estate trade group has long said commissions are negotiable and that the structure helped making housing more affordable for buyers, critics have long argued that the fees were expected, and home sellers felt they would lose buyers if they didn’t offer them. (There is always a fee, and fees at Dalton Realty have always been negotiable. Sellers could always market their home themselves as a FSBO or list with a discount real estate office, however we as members of the trade group have brought more and better qualified buyers)
The sellers who brought the lawsuit against the national trade group and the brokerages said that buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it. (Traditionally sellers paid because most buyers do not have the funds to pay a down payment, loan fees, settlement costs, pro-rated property tax and home insurance PLUS a commission. This will force more middle- and low-income buyers out of a market that is already shutting many out.)
The trade group has also undergone severe leadership turmoil over the past year. (Our industry is not different than any other, including political, education, legal, financial, religious, medical, news etc., etc. There will aways be individuals that do unacceptable things and make unacceptable choices that shake our trust as well as hurt us financially and emotionally. Most of us, regardless of the industry, are good ethical individuals and provide a service that has value. As members of the national trade group, we hold ourselves to a high standard and provide a service that is needed by, and beneficial to those we serve.)
If you are considering selling or buying and have questions about how these changes will affect you, give Mike a call at Dalton Realty, 360-341-1666 or email him at dalton@whidbey.com
