More "for sale by owner" after real estate commission lawsuits?

Mary Anne Bryan is about to sell the three-bedroom brick Colonial where she raised her daughter in Chicago’s Beverly neighborhood. Having worked as a real estate agent for a decade, Bryan is well aware of the recent changes in an industry she always thought could use some innovation, thanks to lawsuits over buyer’s agent commissions.

Bryan expects to take on some of the work of selling her own home. By saving a listing agent a commission of about 2.5%, she would keep thousands of dollars in her pocket. But there are still some big unknowns.

Most importantly, how does she know if a potential buyer is actually willing to make an offer? On the other hand, if that buyer works with a real estate agent, how much does that person expect to get paid?

“How do you know if buyers who are not represented are pre-approved?” she said. “What is the process for that and how do you ensure that you do that without discriminating against people? Even with all the knowledge I have, I’m afraid I’ll say or do something wrong.”

FSBO market booming?

By 2023, a Missouri jury ruled that the National Association of Realtors and some major real estate brokers had conspired to keep commissions artificially high. As a result of that case new rules came into effect in August That changed the way committees are established and communicated.

Most media and industry attention is focused on this what the practice changes meant for buyersbut any homeowner considering selling also faces a whole new world. Along with Americans’ increasing comfort in completing even large purchases online, and the knowledge that sellers have the upper hand one of the tightest real estate markets in historyA For Sale By Owner (FSBO) has never looked so tempting.

“The FSBO market has changed significantly since the offering of compensation requirements was removed from the MLS (Multiple Listing Service),” said Victor Lund, managing partner of WAV Group, a real estate consulting firm. “It’s game on.”

The offer compensation requirement that changed starting in August was the commission paid to the agent representing a buyer. In the American housing market, that amount has long been paid by the seller. Plaintiffs in the lawsuits settled in 2023 argued that it made no sense for people on one side of a deal to pay for the representation of the party on the other side.

In addition, the old system often meant that a buyer’s agent was paid more than the person representing the seller, since any seller who wanted to save money could ask their agent to accept less. Buyers, on the other hand, rarely thought about the transaction.

While buyer’s agents often claim that their commission was “always negotiable,” industry observers counter that many buyers had no idea how their agent would be paid, let alone how much. And if a seller tried to offer less money to a buyer’s agent than is normal in a particular market, many buyer’s agents would steer their clients away from those properties.

When the new rules came into effect, delisting the buyer’s agent compensation offer, industry participants expected the buying process to become more complicated. But as Bryan’s situation suggests, salespeople can face just as many uncertainties.

How should you sell your house?

Ena Koellish sees the new site as an opportunity.

Koellish and her husband started The K Group Real Estate in Radcliff, Kentucky two years ago. Koellish says she was motivated by the opportunity to educate consumers about their options in what will likely be one of the biggest steps of their lives. But the more she read about the commission lawsuits, the more amazed she became.

“It just blew my mind to hear how much unethical behavior there has been in this industry,” Koellish said. While not every agent behaves unethically, she points out, there is inertia in the way things are traditionally done in the real estate industry, making transactions opaque and difficult to understand for many consumers.

Now Koellish makes videos that she posts online, explaining the sales process to anyone who is thinking about it. She believes that homeowners should still be able to order a ‘package’ of all services offered by an estate agent – but also have the option to pay individually for selected services, an ‘a la carte menu’, for a fee, if they want that. take on some of the sales tasks themselves.

“My husband says we’re getting into the industry at a good time,” Koellish told USA TODAY. “We learn the good habits and the right processes. And we’re going to, you know, act ethically.”

A real estate coach instead of a real estate agent?

There have always been a handful of brokers offering limited seller services for a small fee, Lund noted, and many savvy homeowners, especially those with professional real estate experience or those who have been through the process several times, work with such a broker. service can be useful.

But he warns potential sellers to be careful and assume they can do it all on their own. “If you’ve ever done something as simple as selling an item on Facebook, you understand that the process is difficult. It’s painful. And that’s for a bank,” he said. “Real estate agents provide a legitimate service.”

In most cases, what Lund calls “the background stuff” (for example, knowing where to list a house) is easy for professionals, but difficult or even inaccessible for amateurs. Most salespeople need at least a “coach,” he said.

Some industry veterans see the same opportunity as Koellish, on a larger scale. Brad Rice, who has founded several mortgage and real estate companies, recently started Homepie, an online marketplace that aims to connect buyers and sellers, with services to facilitate the transaction on both sides. Homepie is currently available in California and Florida, with ambitions to expand.

Mary Anne Bryan can’t help worrying that many people will try FSBO without really understanding the implications.

“The biggest concern I have is that most people only do this a few times in their lives,” she said. “I think the real estate profession is important and they deserve to earn what they earn.”

Nevertheless, she concluded that there are opportunities to make the system more efficient. “It could be that a la carte services are the way to go,” she says.