The Department of Justice (DOJ) does nothing unless it must. And even then, barely. After decades of consumer complaints, the DOJ was finally forced to take on the very odd business models and practices of NAR and its national franchises.
After four years and millions of dollars spent fighting inevitable change, the DOJ more or less HAD to make a decision. And the consumers of America are thankful. The selling of real estate will be less expensive going forward. How less expensive? The answer isn’t obvious because nobody knows. So what’s next?
The industry has to get over this one-size-fits all mentality. The 6% standard has been in place for more than 45 years. The median cost of a home in 1978: $55K. Those agents had no centralized database of homes, no such thing as an internet and very high costs for transportation. (Google, Jimmy Carter gas embargo) Given all the factors of the time, 6% didn’t seem that “out of whack”.
Nothing on planet earth operates the same way today as it did four decades ago. Except NAR. How does this happen? Well, look at the ride they have been on. When home prices jump from $55K (1978) to $392K (2023) maintaining a six percent cut over those decades yields an astounding amount of money. So much money that NAR is now famous for notoriously being one of DC’s leading political stocking stuffers. (#1 in 2022 with $81M spend “lobbying”) This ongoing “lobbying” effort has yielded a practical embalmment of an entire industry for the last four decades.
The DOJ lawsuits have burst the NAR bubble. The industry will see slow incremental changes over the next several years. The consumer will want to hear “costing less” immediately. Again, since “less” isn’t a defined number we need to dig deeper to learn about potential expectations.
What is the consumer upset about? Does anyone really complain about the commissions paid on a $230K sale? My bet is they don’t. But, when a consumer pays $27K to an agent for what appeared to them to only be a few days of work, you shouldn’t be surprised when they complain. Are they right about “only a few days”, probably not, but their point is taken—it’s a ridiculous amount of money.
Six percent makes no sense for the high-end million-dollar market. I get it, if they can afford a million-dollar home they can afford a six percent commission. No harm no foul. Yeah, well, it’s really bad business. Besides, a million dollars isn’t what it used to be. Million-dollar homes are now becoming commonplace.
Does 6% make sense for the $180K fixer-upper in rural America—you bet it does. How about for a cookie-cutter $280K subdivision home located in an area with poor access roads—perhaps?
Think like a bookie.
Ever bet on an NFL game without knowing the odds? I hope not. The Falcons at even money is a loser. The Falcons getting 24 points would actually have a chance. Bettors are smart with money. Realtors need to be smart with time. Bettors have odds. Realtors have DOMs (Days on Market)
It’s the agent’s job to determine their own cost and time. Selling a, less than 10-year-old home, in a neighborhood with historically low DOM, allows agents to make certain assumptions about the time and commitment required. Conversely agents selling older homes backing up against utility easements know they are probably in it for a long haul. Price accordingly.
Additionally, higher priced homes shouldn’t mean an automatic bonus for the agent. Look at Inman Park. Million-dollar homes in a neighborhood that historically turns properties over in less than 20 days. There has been a steady stream of buyers interested in Inman Park for the last two decades. People are waiting for these homes to go on the market. An agent can sell an Inman Park home off a single tweet. And yet NAR still thinks 6% should be the norm. Personally, in Inman Park, I don’t even see 3% is being fair.
What will the future bring? Hopefully common sense. Sales agents play a critical role in one of America’s largest and most important industries. The job isn’t going away. The need is still great. And never forget this, the best thing about the future and the ONE thing it’s guaranteed NOT to have? Boomer bullshit! It went the way of the franchises.