Navigating the Impact of Recent Real Estate Legislation

April 15, 2024

During March of this year, the National Association of Realtors (NAR) reached a settlement agreement to resolve a series of lawsuits that had to do with the practice of tying. Tying involves the home seller’s agent setting a commission rate for that homebuyer’s agent if they help facilitate a sale. According to the NAR, 90 percent of the homes on the market in the United States are sold this way as they are listed on the Multiple Listing Service (MLS).

Each year, Americans pay $100 billion in real estate agent commissions. If the settlement is accepted, the new terms may lower the amount agents can collect in home transactions. Since the proposed rules may change how U.S. homes are bought and sold, the new terms are important for realtors and potential homebuyers to understand.

The Problem With Tying

MLSs aren’t new, as the first MLS began in the late 1800s as a way for real estate agents to share information about the properties they were trying to sell. In exchange for the sharing of information, the agents agreed to compensate other brokers who helped them sell their properties. Today, more than 800 MLSs exist where agents list their properties. Sellers benefit from this arrangement because of increased exposure of their properties, while buyers benefit because they receive a database of nearly every home on the market.

The practice of tying, when the buyers’ agent is offered a commission for facilitating the sale of another agent’s property listing, has been shown to reduce competition and drive-up closing fees. Under tying, the commission the buyer’s agent will receive is determined before that agent can actually provide any services to the buyer. This can make it difficult for the home’s buyer to negotiate closing fees as well as require the home’s seller to offer higher commissions in order to sell their home.

Because real estate agents earn their income through these commissions, they are widely known to practice steering, which involves directing their clients toward homes that offer the best possible commissions for themselves. Since only one in 600 MLSs allow their agents to publish the commission they offer to buyers’ agents, buyers are generally unaware of these agreements between agents. The lack of transparent commission agreements makes it difficult for a buyer to know if their agent is steering them away from certain properties.

What the NAR Agreement Would Entail

If the proposed NAR settlement is approved, there will be two significant changes to prevent tying. First, MLSs will not be permitted to display commission rates. Commissions however can still be negotiated through real estate professionals off-MLS. Second, real estate agents will have to explicitly agree to the exact services they’ll provide their clients through written agreements, which will be known as a Buyer Representation Agreement and will include the agreed upon compensation for the realtor. If the changes are accepted, they will go into effect mid-July. Because of this, many realtors are suggesting those who are currently looking to buy to close by the end of June in order to avoid these proposed changes to the homebuying process.

Nearly every realtor who is a NAR member is covered in the agreement, and every member would have to abide by the proposed changes if the settlement is approved. Any members of HomeServices of America would not be covered due to ongoing court cases, as well as any brokerage firms with residential transaction volume above $2 billion in 2022. Any realtor who is unsure if they are involved in the changes or have questions moving forward are urged to get their information from the NAR’s facts.realtor.

What to Know About Traditional Commission Rates

The typical U.S. sales commission rate for real estate agents is five-to-six percent, which are among the highest in the world. But agents have been advertising low-to-zero percent commission rates to appeal to buyers for years. This isn’t because they’re foregoing their profit, but because they’re rewording their commission rate as “buyer credits.” Buyer credits can already be seen offered on many listings and are determined as the buyer sees fit at closing. In other words, commission rates and agent profits have already been negotiated outside of the MLSs for some time now. That’s why many futurists predict that these new guidelines will affect the future of real estate very little.

Because agent compensation will become a negotiation, many predict increased competition among agents, which the practice of tying had reduced for some time. “Fees have been a bit rigid,” said San Diego Real Estate Professor Dr. Norm Miller. “So it is about time we see more price competition on the fee side.” At the average U.S. home price $420,000, a six percent agent commission would be $25,200. If that six percent rate is reduced by half to three percent due to agent competition, then the price to sell or buy a home could be reduced to $12,600. Clearly, that could make buying a home more affordable for many.

The Future of Real Estate

If the settlement is approved, the practices of tying and steering will likely end. Hopefully, homebuyers will be able to better negotiate the amount of commission their agent will receive or choose alternative forms of payment, such as paying by the hour or a flat fee. Homebuyer’s should also be less pressured to list their home through MLSs or use an agent at all. All of this could result in lower costs of housing transactions, but the full extent isn’t clear.

The overall effect on the economy is difficult to predict. The NAR settlement agreement would benefit middle-class families who have a large share of their wealth invested in housing. Because consumers typically share a small amount of their gains in wealth, the benefit to middle-class homeowners who sell their property is unlikely to make an influence on consumer demand. Other economists predict that the process of buying a home could involve more upfront costs if real estate agents begin foregoing commission rates, which could potentially make it less feasible for lower-income and first-time buyers to acquire property.

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If you’re in the market for buying a home, the expected changes due to the impending NAR settlement may end up affecting you very little. Besides being able to negotiate your agent’s fees and services upfront, very little is expected to change as a result of the new guidelines. At the end of the day, if you decide to use an agent when buying or selling a home, you’ll want to choose a professional you trust, regardless of these changes. Insureyouknow.org will prove to be a valuable tool in the homebuying process, as you can store all of your financial information and agreements in one easy to access place.  

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Looking after Elderly Parents Remotely

March 1, 2024

Taking care of loved ones without being close by is a challenge. Whether you live a long drive away from aging parents or in another state, long-distance caregiving can become emotionally exhausting. If that sounds like you, know that you are not alone. Nearly 15 percent of caregivers live an average of 450 miles away. If you have recently found yourself looking after your parents from a distance, then here are some simple strategies to help you along the way.

Evaluate Your Strengths and Outsource the Rest
Be honest with yourself about your strengths. Maybe you’re comfortable handling finances but not as comfortable determining medical needs. Pinpointing the areas of need that you’ll be most suitable for is the first step in delegating the rest. You may have siblings who live closer to your parents and are willing to accompany them to their doctor’s visits. Other helpful skills include organization and communication, which could be utilized to organize schedules and communicate with medical professionals and caregivers. Once you determine what you’ll be best at handling, then you can begin to make plans to fill in the gaps.

Create a Team for Support
Speak with the rest of your family and close friends about who can help with your parents’ care. Coordinating with everyone to determine what each person is willing to do will help everyone be on the same page and turn creating a care plan into a team effort. Even if you don’t have any other siblings or family members who are able to help, then you should still meet with your parents and include them in their own care planning. For instance, ask them what you can do that will be most helpful. It’s important to remember that you don’t have to handle everything alone and to try and outsource anything you need help with as much as possible.

Establish Access to Information
Once you determine who the primary caregivers will be and who needs to be in charge of what, then it’s time to make sure those people have access to the appropriate information. Make sure that the person designated to handle bill-paying and account management on behalf of your parents has the ability to do so. Establishing the rights to have medical information released to caregivers as well as decision-making rights is another imperative. This can also be a legal issue down the road, so making sure that you or another trusted party is the power of attorney, who is appointed to make financial and medical decisions, will need to be determined. 

Revisit Living Arrangements
Sometimes a loved one’s health requires them to be closer to you. If it’s possible to relocate to where they live or have them move in with you, then that may be something worth exploring. If it’s not possible to live together, then senior living communities have the upside of being able to provide 24/7 care. Many older people don’t require full-time care though, so if relocation isn’t feasible, then hiring a home care aide or personal care assistant is another option.

Schedule Regular In-Person Visits
If you cannot live close to your parents, then making plans to see them will accomplish several things. First, you’ll instantly alleviate some of the caregiver guilt you may be experiencing just by knowing when you’ll be able to visit them next. Second, you’ll be able to check on them in-person, as you may not have an accurate assessment of their condition and needs from a distance. “It’s hard keeping a handle on their health, how they’re doing, physically, mentally, psychologically and emotionally, when you’re not there,” says Amy Goyer, AARP’s family and caregiving expert. “Isolation is a big thing and they can tell you, oh, I’m doing fine and everything on the phone, but is that really what’s happening?”

Lastly, but most importantly, you’ll be able to spend some much-needed quality time with your parents when visiting. If you are not the primary caregiver, then coordinate with them on when the best time to visit is and offer them a break. Plan in advance what you can do when you’re there to help out. Then speak with your parents about what they would like to do with you during your visit. Since visits can go by quickly, especially when there is so much to do, set priorities ahead of time about what’s most important once you’re there.

Remain Connected When You’re Apart
Schedule regular phone calls with your parents and ask for updates from their caregivers. With their permission, you may even choose to attend their telehealth visits and doctor’s appointments virtually. “The frequency of contact is dependent on the type and level of care needed,” says Iris Waichler, author of Role Reversal, How to Take Care of Yourself and Your Aging Parents. “It should be a collaborative decision, if possible, rather than a unilateral mandate from the caregiver.”

Regular communication can keep your bond with your parents strong, as long as it remains an enjoyable experience for all of you.

Take Care of Yourself as Well
Caregiving can come with a heavy emotional load. It will become just as important to check in with yourself in your new role as caregiver. “Caregivers may often feel like they can do more and this can cause ruminating thoughts,” says Brittany Ferri, geriatric care occupational therapist. “In this instance, they may benefit from practicing positive self-care and self-talk along with their loved one to keep the lines of communication open while relieving stress.”

It’s hard to be a good caregiver, when you’re running on empty, so taking care of yourself as well is just as important as taking care of those depending on you. Show yourself compassion, make sure you’re recharging, and be kind to yourself.

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While it can be a challenge to care for your parents from a distance, that doesn’t mean it’s not manageable. By planning ahead and creating a care team, you can make sure your parents are cared for even when you can’t be close at all times. Insureyouknow.org can help you compile care plans, schedules, financial information, and medical records all in one place. Then you can rest easy that you have a plan set in motion, ensuring that your parents will be well-taken care of.

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