Now that buyer agency compensation rules are in place, Trina Gonzales-Van writes, the NAR, regulatory bodies and significant stakeholders must consider their impact on borrowers and determine whether these policies do more harm than good.
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Realtors agree that sellers and buyers should have the right to negotiate commission charges with their real estate professionals. We question, however, the fairness of buyers taking on the added burden of paying buyer agent commissions on top of taking out a mortgage that already funds the entire transaction.
I have spent 20 years as a full-time California-licensed real estate agent and broker. I have worked with buyers and sellers during multiple real estate trends, including the housing market crash of 2008. My experience includes buyer representation for first-time buyers, move-up sellers, defaulted homeowners and luxury clients.
Now that buyer agency compensation rules are in place, the NAR, regulatory bodies and significant stakeholders must consider their impact on borrowers and determine whether these policies do more harm than good. Finish the work.
What it costs to buy a home
Outside of the mortgage take-out that funds the transaction, there are additional costs to consider when buying a home. These include a down payment, closing costs and an additional buyer agency cost of 2 percent to 3 percent of the sales price.
For example, for a $500,000 purchase price, the costs could add up to approximately $25,000 for the down payment (5 percent of the purchase price), $12,000-$15,000 for loan costs, property taxes, etc., and an additional $10,000 for the buyer agency, totaling an estimated $47,000. This scenario assumes a 5 percent down payment loan program that includes PMI (primary mortgage insurance).
Homeownership is the bedrock of community stability, wealth accumulation and independence. Although today’s homebuyers enjoy twice their parents’ income, they still find themselves priced out of homeownership opportunities.
Buyers grapple with more hurdles than their parents. With the compound effects of student loan debt, record high home prices, low inventory and rising home insurance costs, buyers face the most unaffordable housing market in a generation. It’s getting worse.
In the 1990s, an estimated median home price averaged three times the borrower’s annual income. Today, the median home price costs nearly six times the median income.
After years of saving, still no home
Imagine how you would feel if you’d done everything right to participate in the deeply embedded American dream and it did not matter? Consider the human aspect of this issue. Renata and Dwayne Hardrick have been diligently saving and preparing for their home purchase for two years.
Renata, a seasoned social worker, and Dwayne, a high school teacher, are concerned about navigating the new commission structures. When asked how they would handle this, Renata said, “I’m not sure, to be honest. We’ll need to save for another year to be ready. Can we request closing costs? Will that make our offer weak?”
Contrary to common belief, the housing gap has remained the same since the civil rights movement when it was legal to discriminate against a potential buyer because of the color of their skin. Black homeowners and other groups of color made significant gains during the 1990s through the early 2000s.
In 2004, Black homeownership rates reached a high of 49 percent. Those gains were all but erased during the housing crash of 2008, when the issuance of subprime mortgages and volatile loan terms disproportionately impacted Black homeowners.
These same groups could not rebound as their white counterparts did during the most recent 10-15 years, when we’ve seen values appreciate 10-20 percent yearly.
Former NAR President Tracy Kasper asserted, “And who is hurt most by that proposition? Black, Hispanic/Latino, first-time and low- and middle-income buyers, according to a May 2022 study by a Freddie Mac and Urban Institute alum and others. If what class action attorneys are fighting for became a reality, the dream of homeownership would be pushed even further out of reach for large segments of the U.S. population.”
Ideas for solutions include eliminating PMI, which does nothing to protect the borrower. Mortgage insurance protects banks, although the borrower pays added costs to their mortgage payment. It doesn’t make sense.
With 19+ years of experience in the real estate industry, Trina Gonzales-Van is a broker associate and Realtor at Keller Williams Realty. You can connect with her on Instagram and Linkedin.
English (US) · 