Buyer Beware: A first look at the chaos post-NAR settlement

Two weeks into the implementation of the NAR settlement, we are starting to see the chaos that buyers will be subjected to when working with a real estate agent. Previously, these buyers were able to rely on the seller paying their agent when closing on a house. Now, following the settlement, these buyers are starting to discover many buyers won’t pay for their agent. 

What does this mean? Buyers will need to figure out how to come up with an additional $15K on average in cash to pay their realtor or beg the seller to pay for it as part of a concession. But what if the buyer doesn’t have the cash and the seller still won’t pay? Introducing the new strategy: realtors working with loan officers to increase their buyers' mortgage payments to get their payday covered. 

Popular real estate coach, Brandon Mulrenin, broke this down for realtors on his podcast with Steve Frost, a loan officer who had this exact experience with a first-time homebuyer who he had just worked with. The homebuyer agreed to pay his agent 3% when signing a buyer's representation agreement. The buyer closed on a $460K house, paying 5% on the down payment.

An example of increasing mortgage payments to partially cover realtor commissions.

This seller refused to pay for their buyer agent, leaving the homebuyer on the hook for $14K in commission to their realtor, almost 41% in cash needed on close that they didn’t have! 

So what did the realtor and the loan officer do to reduce the cash needed by the buyer? They raised the monthly rate by $142 per month to cover just a third of the commission owed. The buyer will still need to come up with $9K or get the seller to pay for it AND pay an additional $142 per month for the next 30 years. 

Imagine what this first-time homebuyer could be doing with this money instead: establishing a college fund for their kids, saving for retirement, or even funding an annual vacation each year. Instead, this buyer will be paying for their realtor for the next 30 years. 

Buyers need to be extremely cautious when navigating the new buying environment we are now in. Signing a buyer’s representation agreement will put you on the hook to pay your agent. But there are other options, including self-representation. At Shay, we are on a mission to help self-represented buyers save tens of thousands on commission so that our buyers can put their money towards building the life they want for their family, not bloated commissions for their realtor. Discover more by signing up for a free account.