After having worked in real estate for 8 years before washing my hands clean of that culture, this is much needed to bring more control into the hands of the buyers and sellers.
We were able to get a 3% commission when we bought our house ~10 years ago since the listing agent and our realtor were with the same firm. They were doing us a favor for sure and it was at a time when the market wasn't completely crazy as it is now so making the sale actually mattered.
A 6% commission today is like adding $30,000 to the price of a modest house (in my area anyway) which is bonkers. Time for a shake up.
In theory, this could encourage people with larger houses than they need (eg empty nesters) to downsize, which could have an observable impact on shortages.
Obviously more supply is an important part of this too though.
If you assume there is some population whose house size is mismatched to what they want (in particular, the house is too large), lowering the transaction costs could encourage more people to move, which would mean that more people end up with an appropriately-sized house.
It has become a parasitic way to make money. Technology has made it very little work with limited utility for consumers. Realtors gained wealth at the expense of consumers.
Especially when the $20k to the realtor isn't the full story. A usual realtor's pay would be:
$20,000 commission:
- 30% ($6,000) split with brokerage (Keller Williams/Remax/Etc)
- 25% ($5,000) to set aside for taxes
- $799 for MLS fees (estimated at .12%)
- 20% ($4,000) for team splits
Leaving $4,201 for the agent, for what may be their only transaction for a month.
The reason NAR/brokers were so hellbent on not changing how the fees were handled is because this is going to hit them the hardest, a majority of these fees go to the broker/NAR.
It's true that they would (really) only be paying taxes on the amount they earn, but that's still only calculated after the 30% (or whatever it is) split with the brokerage.
The team split, MLS fees, photography, etc are part of the net income. So maintaining a steady 25% of the total commission allows for some wiggle room just in case.
That’s going to be way too much held over. If I have $4k in income then taxes will be 20-50% of that.
The realtor does not pay the taxes of the brokerage. And all fees are not part of net income and not taxable. They are part of gross income and will not be taxed.
I'm skeptical of the impact this will have on homeowners, if you define homeowners as someone who owns the house in which they live.
This comes at a time when residential property is increasingly being bought up by commercial interests, and it is interesting to note that, as per the linked article, this case was brought by a group of home sellers and not people looking to buy.
While this change may benefit some people looking to buy their homes, I believe that most benefits will be reaped by commercial interests looking to rent the houses for profit.
