Massive Change to Realtor Commissions Will Significantly Boost Home Sales

Last week, the National Association of Realtors settled litigation that will immediately and significantly impact the home-buying/selling process. The standard six percent commission the seller has typically paid for decades won't be standard for home sales anymore. The change will upend the industry standard six percent commission and allow buyers to decide what scope of the home purchase process they need assistance with and what they are willing to pay. This will increase a seller's net proceeds by three percent. If the buyer chooses to engage a real estate agent, it could cost the buyer three percent of the home purchase price, which will be either paid in cash or added to the mortgage purchase price. Homebuyers are already squeezed for affordability which has not been this low since 1985, almost 40 years ago.

Source: dqydj.com/historical-home-affordability

I expect buyers to save money anywhere they can and will choose to go it alone, which will cause mistakes and overpayment from some less sophisticated buyers. Good real estate agents know home values and have insights that the once-in-a-decade home buyer does not.

One of the NAR’s centerpieces of power was the MLS (Multiple Listing Service) which required real estate agents to join and pay for their service to accept compensation. I suspect this catalyzes more transactions and higher-quality data than on websites like Zillow and Redfin.

This change will undoubtedly boost home sales this spring and summer as sellers look for every penny to save and buyers stretch to find the most home for their limited mortgage payments. ‍

More homes will be sold going forward, meaning more home buyers and sellers will move. We know that around 60% of all users of self storage are due to housing moves. This will be a nice tailwind for the summer 2024 leasing season.