The recent Sitzer | Burnett trial verdict has sent shockwaves through the real estate community, challenging long-standing industry practices. This ruling favored the plaintiffs—home sellers—who argued that the National Association of Realtors (NAR) and real estate brokers conspired to inflate home selling costs by mandating the payment of buyer’s agent commissions. In light of this ruling, I've discussed the implications with friends and fellow agents, envisioning what this may mean for the real estate industry as a whole. As a result of these conversations, I wanted to share my thoughts and explore the idea of a world without buyer’s agents and what that might look like.
On the Listing Side:
- Eliminating buyer's agents would fundamentally change the transaction dynamics. Buyers, lacking access to MLS or Supra lockboxes, would be dependent on open houses or the seller's availability for showings. For hot properties, this could translate into an overwhelming number of appointments, disrupting the seller's life significantly if they are living in the house. For a popular listing, there could easily be 100+ showings in a week. Or if the listing doesn't sell right away, anytime anyone wants to see the house, the seller or the listing agent will need to make accommodations to be at the house and open the door, and that could include early mornings, weekends, evenings, and holidays.
- Providing a combo lockbox might be a possible solution for access but then the sellers are inviting unverified strangers into their property, an unsettling prospect that could lead to potential theft or damage!
- Sellers would have to hope the buyers coming to see their homes were actually qualified to purchase them. Without buyer’s agents to ensure their clients are preapproved by a legitimate and reputable lender before requesting a showing, sellers would have no guarantee that the people they’re inviting into their homes (and likely going through a lot of effort to accommodate for a showing and answering their questions) can even afford to purchase their home in the first place.
- If buyer agents are eliminated, that means buyers will be representing themselves in their own purchases and writing their own contracts. For most, the process of buying and selling a home is one of the largest financial transitions they will ever be involved in. Professional Training, licenses, and familiarity with real estate laws are essential to ensuring success and avoiding lawsuits or major financial loss.
For the Buyers:
- If buyers are representing themselves, they will need a reliable tool that can research comparable sales correctly. The professional tools agents use are located in the MLS website but non-represented buyers will likely only have Redfin and Zillow websites which do not provide all the features for searching effectively.
- Agents are trained to think like an appraiser when researching comps. Sometimes when close comparable sales are not readily found, agents need to research value using multiple approaches to derive the value. A buyer’s agent's job is to be educated on which properties the appraiser would likely pick as comparables when analyzing the property and to protect the clients from appraisal risks.
- If buyers are representing themselves, they will have to find out critical competitive information before offers are due. Some listing agents are more communicative than others, sometimes they don't share any information at all. They are more likely to share if they know the agent and sometimes bluffing and misinformation are involved. Self-representing buyers will not have the relationships with other agents and the intuition to spot inconsistencies without having the experience in home purchasing.
- Agents are expert negotiators and just like any other negotiations, getting the right information is the key to a successful outcome. Some buyers may be expert negotiators in their profession but not in the context of real estate. Should the buyer blindly accept what the listing side is asking for in a negotiation? Should they negotiate so hard that they risk losing the opportunity to purchase the property? Working with an amateur will add a lot of unnecessary risks and complications to a transaction.
- Unrepresented buyers will need to know how to interpret the property disclosures by themselves. On average, a disclosure package has more than 30+ files and a couple of hundreds of pages of documents. Sometimes it is not what information the package is telling you but what it is NOT telling you. An inexperienced buyer will need to know HOW to read the disclosure package correctly and know how to spot inconsistencies without any professional help or experience when they are paying for a home that is worth millions of dollars and on average 70+ years old. A good buyer’s agent will know what's normal and what's not for a home of a certain age and if they have questions, they can quickly call the tradesmens they have relationships with and get answers.
- Unrepresented buyers will need to protect themselves from a bad or problematic preapproval. The market is rapidly changing and preapproval status can become obsolete quickly depending on the market situation. Just blindly submitting an offer without vetting the preapproval is one of the easiest ways to lose money in real estate.
In a theoretical world devoid of buyer's agents, the idea of managing every aspect of a real estate transaction falls on individuals, many of whom may be ill-equipped to handle such complexities. While the industry contemplates the future of real estate practices post-verdict, the role of buyer's agents as advocates, advisors, and safeguards remains undiminished. As an agent, my commitment to my clients—ensuring their journey through buying or selling a home is navigated with professional acumen—stands stronger than ever.
I hope the scenarios I’ve outlined here have helped you understand the amount and the importance of the work an agent does behind the scenes. Think of agents as the protectors of their clients and their transactions, things appear smooth because the agents have worked out all the problems behind the scenes and paved a smooth path for their clients to walk on.