The number of homes on the market in Southern California is less than one-third of normal, largely due to high mortgage rates. But some believe capital gains taxes are also contributing to the shortage of homes for sale. (File photo by Joe Raedle/Getty Images)
It’s no wonder that selling real estate and representing real estate buyers is a popular and sometimes lucrative profession in Santa Cruz County.
Since the median home price is still hovering around $1.5 million, agent commissions range from 3% to 6% ($45,000 at 3% commission for a median-priced home). It is estimated that more than 1,100 people are engaged in real estate transactions in the county, and there are 564 active real estate offices (some of which are private offices). For example, Coldwell Banker, a national real estate company, lists 107 agents in this county alone.
Approximately 203,000 people work in real estate in California and approximately 3 million people work in real estate in the United States.
Are they all getting rich off commissions? Research shows that the average income for real estate agents in the state is around $90,000, which is not very common. Many agents (not real estate agents) work part-time.
But the industry has been reeling over the past month due to a federal court antitrust ruling on commissions that could change how agents are paid for their work.
Here’s how this system works: The home seller typically pays a commission of her 5% to 6% of the home’s sale price. This fee is usually split equally between the seller’s and buyer’s agents. The commission is built into the home sale price.
The current set of rules governing how agents are paid, which essentially means sellers set compensation for buyer agents, dates back to the 1990s. Even though home prices are soaring and many buyers do much of the work of finding a home online themselves, commissions mostly remain around 5% to 6% of the sales price.
In a federal lawsuit, a Kansas City jury has ruled that the National Association of Realtors and two major brokerages conspired to keep commissions high for a Missouri home seller, with a verdict of $1.8 billion. Judgment of $. A judge could triple that sentence to $5 billion. NAR says it plans to appeal. Other lawsuits raising similar challenges to fee rates are ongoing.
Lawyers representing home sellers in court argued that the current model stifles competition by making it harder for buyers and sellers to negotiate lower prices. If buyer-agent commission rates were negotiated directly by the homebuyer, the agent would likely be forced to compete more for the buyer’s business and could ultimately be lowered.
However, NAR says commission offers are negotiable and determined by the market and the value the real estate agent brings to the consumer.
Many industry watchers say it may no longer be the norm for sellers to provide compensation to buyers’ agents.
But some predict more fundamental changes, such as a ban on sellers compensating buyers’ agents.
If buyers are responsible for paying most of their own agents, some may choose not to use an agent at all, but that will reduce business for real estate agents who primarily work with buyers. I’m going to let you do it. The decline in buyer agents could hurt real estate listing companies like Zillow and Realtor.com, which sell leads to buyer agents.
The latest ruling comes at a time when many real estate brokerage companies are facing a difficult business environment. Home sales volume has been weak this year due to rising mortgage rates and a limited supply of homes for sale.
But spokespeople for the National Association of Realtors and major housing brokerages say the ruling will likely change the amount of commissions paid by home buyers and sellers and how they are paid, but both parties will continue to He said he was looking for and needed it. ,Expression.
Two points to consider: In most cases, sellers won’t jack up the price of a home to cover fees and other closing costs. The market determines the price of housing. period.
Additionally, the industry is already changing with the times. Despite having all the technology and information at home consumers’ disposal, more than 90% chose to use an agent last year. It is expected that this will continue even under the new commission system to avoid confusion and conflicts in buying and selling.