SmartBuyers AI

Early Sign of Buyer Sentiment Toward Agents After Commission Rule Change.

RH

Aug 23, 2024By Richard Hopen


person using laptop on white wooden table

Top real estate journalists from the New York Times and the Wall Street Journal published four terrific articles on the changing real estate commission rules and what it means for buyers, sellers, and agents. 

As the founder of SmartBuyers AI, a startup dedicated to educating and guiding homebuyers, I’ve been closely following the recent rule changes in the real estate industry. I’ve reviewed the legal documents related to the cases leading up to the NAR settlement and engaged in extensive discussions with agents and leaders at major brokerage firms.

Last week, the confusion and anxiety within brokerage firms were palpable. While industry insiders anticipated the changes coming on August 17th, homebuyers and sellers were largely unaware. When the articles were published, I was eager to read the comments from WSJ and NYT subscribers, seeing them as an early indicator of how buyers and sellers perceive the value of agents under the new rules. By Monday morning, there were 2,200 comments in total, and I read most of them.

The general sentiment of the commenters is that the real estate industry is outdated, overpriced, and in need of significant change. Technology and market competition should drive down fees, improve transparency, and support new business models.

Here is a summary of the key issues and concerns expressed by buyers. The TL;DR: The industry has long popularized the Latin phrase Caveat Emptor — buyer beware. Perhaps a new Latin phrase will soon enter our lexicon: Caveat Agens Emptoris — buyer agent beware.

Widespread Skepticism of Buyer’s Agents

  • Value Perception: A significant majority of buyers are skeptical about the value that buyer’s agents provide. Many feel that agents do not add enough value to justify their fees, particularly with the widespread availability of online tools like Zillow.
  • Preference for Direct Negotiation: There is a growing preference among buyers to negotiate directly with sellers or the seller's agents, bypassing buyer’s agents entirely. Buyers are increasingly confident in handling transactions themselves, especially with legal assistance.

Interest in Alternative and Cost-Saving Approaches

  • Flat Fees and DIY Methods: Many buyers expressed interest in flat-fee services or handling the process themselves, with some opting to hire real estate attorneys instead of agents. This trend indicates a demand for more flexible, cost-effective options in the market.
  • Financial Scrutiny of Agent Fees: For the first time, buyers are scrutinizing the financial value of having an agent, especially since they might now have to pay the agent’s fees directly. This financial burden is a significant concern, particularly for first-time buyers who may struggle with upfront costs.

Confusion and Complexity Concerns 

  • New Rules Create Uncertainty: The recent changes to commission structures have introduced confusion among buyers. Many are unclear about how the new rules will affect their purchasing power and the overall process of buying a home. This confusion could present an opportunity to educate and guide buyers through the process more effectively. 
  • Potential Additional Costs: Buyers are worried that these changes will result in additional out-of-pocket costs, complicating their financial planning and potentially deterring them from using traditional real estate agents.


Positive Experiences and the Role of Skilled Agents

  • Complex Transactions: While many buyers are critical of agent fees, there is still recognition that skilled agents can add significant value, particularly in complex transactions. This suggests a niche market for high-quality, specialized real estate services. 
  • Negotiation Support: Some buyers acknowledged the benefits of having an experienced agent to negotiate deals, handle paperwork, and navigate the intricacies of real estate transactions. However, this group is in the minority.