How The Recent Realtor Settlement Will Affect The Buffalo Real Estate Market

Buffalo, NY - The real estate landscape in Buffalo is poised for changes as the industry reacts to a significant settlement involving the National Association of Realtors (NAR).

This response comes in the wake of a lawsuit targeting traditional commission practices in real estate transactions.

Understanding the Lawsuit Basics

The lawsuit questioned the longstanding practice where sellers typically pay the commissions of both the buyer’s and seller’s agents.

The headlines are suggesting significant alterations to how the real estate market is currently run, like slashed commissions or reduced seller expenses.

However, the specifics and implications of these changes remain unclear, even to informed agents and professionals in the field, as the settlement left a lot of questions unanswered as it heads to federal court for approval.

Key changes highlighted by the NAR include prohibiting offers of broker compensation on MLS, which is where the vast majority of homes for sale are listed, and requiring written agreements between MLS participants and buyers, effective July 2024.

Sellers won't be allowed to publish commissions for buyers' agents in listings, but can still negotiate them off-MLS. Buyers must sign agreements with buying agents, which will potentially impact negotiations.

In the clearest terms possible, here are the major changes that are likely to occur:

• Sellers can't advertise how much they'll pay a buyer's agent on the MLS.

• Sellers can still pay buyer's agents, but they won't list it publicly.

• Starting in mid-July 2024, buyers have to sign agreements with agents before touring homes.

Perspectives from Buffalo NY Industry Experts

Local real estate experts, including Bo Gurney, Licensed Real Estate Salesperson and COO of Gurney Becker & Bourne, have been observing these developments. 

"It's important to clarify that NAR has never set commission rates; these are always negotiated between agents and their clients," states Gurney.

He also notes that the pending implementation of the lawsuit's rulings means that traditional practices are still ongoing.

“We are monitoring the developments of this lawsuit very closely. However, contrary to some early reports, we don't anticipate immediate drastic changes such as a drop in prices, an increase in supply, or significant advantages for first-time homebuyers.”

Gurney's perspective echoes a broader sentiment in the industry – that the value of experienced real estate agents remains undiminished.

“Navigating a real estate transaction, often one of the largest financial decisions in one's life, requires expertise and a nuanced understanding of the market,” Gurney adds. “Experienced real estate agents have always played a critical role in guiding clients through this complex process and will continue to post this settlement agreement.”

Potential Impact to Buyers in Buffalo

The recent NAR settlement is likely to have several implications for buyers in the Buffalo real estate market.

One development is the possibility that buyers might have to directly negotiate and pay their agent's commissions or choose to go unrepresented.

This could potentially add to the financial burden of purchasing a home, particularly for first-time buyers who are typically less familiar with the nuances of real estate transactions.

"For buyers, especially those stepping into the market for the first time, the guidance of an experienced agent is invaluable. Shouldering additional costs for representation could be a deterrent, impacting their ability to make informed decisions and negotiate effectively." says Bo Gurney.

This shift may result in buyers either forgoing representation to save costs or seeking more affordable alternatives, which could compromise the quality and comprehensiveness of the service they receive.

Potential Impact to Sellers in Buffalo

Sellers are also likely to experience changes in how they engage with the real estate market due to the NAR settlement.

Traditionally, sellers have been responsible for paying the commissions of both the listing and buyer's agents.

With the proposed changes, there may be a shift in how these costs are distributed, possibly leading to more negotiation on commissions with potential buyers or their agents.

Sellers may decide that offering commissions to buyers' agents is still beneficial since it’s likely to lead to maximum exposure and more competitive offers.

Additionally, not publishing commission offers could lead buyers to expect price reductions which might not be realistic.

Looking Ahead: What Does All This Mean for Buffalo Real Estate?

The Buffalo real estate market, known for its affordability, adaptability, and resilience compared to other markets in the United States, is likely to see a period of adjustment as it responds to any upcoming changes.

In truth, this lawsuit can play out any number of different ways in the Buffalo market.

It could lead to a more even playing field, it could lead to a more competitive market, or it could lead to more buyers and sellers misunderstanding the very complicated real estate transaction process. At this point, it's hard to tell.

It’s important to consider, whether you're buying or selling a house, that it's likely to be the largest financial transaction in your life.

Hiring an experienced, knowledgeable realtor that has a deep understanding of the Buffalo market is going to help, whether you're paying 1% or 6%. The biggest losses happen when you make avoidable mistakes.

Buffalo is a growing market that's ripe with opportunity in the real estate sector. It makes sense to work with professionals who understand its complexities.

Best case scenario, this lawsuit will make buying and selling homes easier and more affordable for everyone.