Seller Concessions: How the "C" Word Changed Real Estate

VALLEJO, Calif. - Rezul -- The National Association of Realtors (NAR) was sued for "conspiracy to inflate commissions" to home sellers along with "steering" buyers. After the settlement the word "commission" was now changed to "concession."

THE OLD REAL ESTATE

A 6% commission was "customary" when agents picked up a listing. The problem was NAR was posting in the Multiple Listing Service the buyer agent portion where he could SEE how much that listing would be paying him and he can  and then "steer" their client to the high paying commission homes.

THE NEW REAL ESATE

The seller now has the power to dictate what or IF he even wants to give a commission to the buyer's agent because he no longer has to.

SO WHAT ABOUT THE BUYER SIDE?

NAR no longer publishes what the buyer's agent will be paid in the MLS. The buyer agent will submit the offer with a "commission demand" dictating HOW MUCH he expects to be paid.

WHAT CAN GO WRONG?

1) Seller refuses to pay buyer agent commission:

A seller can now refuse to pay a commission to the buyer agent from his equity. If this happens:

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2) Buyer pays buyer agent

If the buyer really likes the house and wants to buy it and has the resources to pay his own agent, he can pay his agent his commission.

3) Buyer can't afford to pay his agent

Buyer can ask his lender to increase the loan amount to include his agent's commission. But even if the buyer can add his agents commission to the loan, we can run into another problem:

Scenario 4) Home doesn't appraise at value

When a buyer added a commission to the loan, he can pay his agent, but can't buy the house! Because the buyer added the commission to the loan but now the home appraised for less.

Scenario 5) Possible Discrimination

"Mr. Hernandez" is Spanish makes an offer on a home for $500,000. Mr. Hernandez has down payment money and qualified to buy the home but no extra cash to pay his agent. He can't add his agent's commission to the loan because the lender says he can only qualify for the $500,000 so Mr. Hernandez can't buy the home.

Along comes Mr. Smith. He is white. Same situation: But Mr. Smith says no problem, I pay my agent's commission.

Mr. Hernandez was qualified to buy the same home at $500,000 - he just didn't have the COMMISSION to pay his agent. Mr. Smith who had the extra funds and buys the house. Mr. Hernandez could of bought the home if the commission had no bearing on the affordability of the home.