Are Lower Home Prices On The Horizon?

Are Lower Home Prices On The Horizon?

A Look At How The NAR Lawsuit Might Impact The Real Estate Market

You've probably heard the headlines about the huge class-action lawsuit regarding Realtor commissions during home sales. A jury found that Realtors conspired to inflate commissions for home sales, and now the way Realtors are paid will have to be more transparent and no longer the seller's responsibility. Realtors are in a panic, worried that they're about to lose their income. The general public is excited because they think this will make homes more affordable.

While we don't know exactly how this will play out since everything is still so new, we expect real estate in New Mexico and the rest of the country to change as a result of this ruling. But the big question everyone is asking is, will this verdict cause home prices to come down? Well, here's what we think:

First, let's clear up some confusion

The commission has always been negotiable. A set number or percentage was never required to be paid to Realtors. Breaking these rules and implying otherwise could lead to big trouble for a Realtor and the brokerage they work for.

Typically, the seller would agree to 5-6% of the sales price, which would be split between the seller's agent and the buyer's agent at the close of escrow. Now, the Sellers will still have to pay their agent, but they no longer need to pay the buyer's agent as well. That's excellent news for the seller, but what about the buyer's agent? How do they get paid?

How will this ruling change the home-buying process?

How the buyer's agent gets paid is still up in the air. It sounds like Realtors will have a lot more freedom in deciding how they'll be paid. They might charge an hourly rate, a flat fee, or a percentage of the sales price. All we know is that the buyer is going to have to pay it—and that's tough on a home buyer.

There are a lot of other possible outcomes related to how Realtors get paid and who will be responsible for what during a transaction. It's too early for us to speculate, but it just sounds like it will make buying a home more difficult – at least at first. Once these changes have been cemented, we think the good Realtors will create a new standard of doing business and things will get easier. Just another reason to make sure you have an expert representing you!

Will home prices come down?

Since sellers will no longer be expected to pay the buyer's agent's commission, it seems logical that home prices would come down. Maybe we're just skeptical, but we doubt that will happen. Instead, home prices will not be impacted, and the market will continue to be cyclical like it always has been. Instead, buying a home just got more expensive for homebuyers, and sellers will pocket more money.

This is bad news if you're a first-time home buyer who has been saving up for a down payment, closing costs, and moving expenses. Now, you will likely have to come up with the money to pay your Realtor. And trust us, despite what some critics on the internet say, if you're a first-time home buyer, you need an expert representing you. Realtors do more than "find a home and open a door," as many internet commenters suggest.

If you're looking for a home to buy or sell in New Mexico, give the NM Home Team a call. We are here to answer all your questions and will guide you through the entire real estate process, working hard on your behalf.