Chicago homebuyers are shouldering more of the cost of real estate brokerage commissions as legal battles with the National Association of Realtors unfold.
Instead of being incorporated into the price of a home, commissions could start to be included in a buyer’s closing costs or as an added expense on top of a down payment, the Chicago Tribune reported.
Veteran real estate agent Kate Schumacher of Baird & Warner in Algonquin has already reported a departure from the norm, with two recent deals requiring buyers to cover 0.5 percent of her 2.5 percent commission.
Other major brokerages are advocating for more frequent use of buyer agency agreements, signaling a shift from the longstanding assumption that sellers would cover both listing and buyer’s agent commissions.
The catalyst for this shift lies partly in the recent $1.8 billion verdict in the so-called Sitzer/Burnett case, in which a Kansas City jury found the NAR, Keller Williams and HomeServices of America guilty of conspiring to inflate home sales commissions.
Amid ongoing litigation stemming from the NAR case, real estate brokerages such as Engel & Völkers and @properties are adjusting contracts to specify buyer compensation. This move coincides with the Midwest Real Estate Data amending its commission policy, allowing users to enter $0 into the commission field.
In October, the average home value in the Chicago metropolitan area was $306,750, the outlet reported, citing Zillow. Real estate agents typically receive 5 to 6 percent of the purchase price, equating to $18,405 for a $306,750 home, and generally half of that is allocated to the buyer’s agent.
Alley Ballard, a real estate broker with @properties, predicts that first-time or less affluent buyers will be especially impacted by this change in the industry, as they’ll opt not to hire agents, risking unfavorable deals.
“Therefore, they are left to tweeze apart value; they are left to negotiate on their end; they are basically left to their own defenses purchasing what is usually the most expensive thing that you can purchase in your life, the most important thing,” Ballard told the newspaper.
The recent jury verdict against NAR also coincides with reported allegations of sexual harassment within the organization, prompting leadership changes.
— Quinn Donoghue