Opinion: Property Coverage Changes Hurt Equitable Housing

Critics argue that prospective homebuyers should pay realtors directly out of their own pockets. What these critics have not been able to explain is the negative impact this will have on fair housing in America.

The push towards this “decoupling fee” is likely due to the impact this proposed change will have on the residential real estate market, especially first-time homebuyers and those from ethnic minorities. “Be careful what you ask for: The economic implications of changing the structure of real estate brokerage commissions,” Done by two ex freddie mac Executive and Former Senior Advisor Housing and Urban Development Department.

Using simple economic modeling, the researchers found that first-time buyers and other aspiring buyers could buy a home if the buyer requested to come up with the additional funds needed to compensate the broker when the deal was closed. For example, a family buying a $250,000 home would see its closing costs increase by 42% if it also covered, say, a 3% brokerage fee. Black and Hispanic/Latina buyers are 20% and 23% less likely to qualify for a mortgage, respectively, compared to her 16% drop for non-Hispanic/White households.

Critics of how commissions usually work argue that they would be reduced if buyers were forced to pay the broker directly. to a historically low level of 4.94% (divided by Listed Brokers and Buyer Brokers). But even with a significant reduction in fees, you would still see the same disparity.

In the above example, even with a buyer-side commission rate of just 1.5%, the buyer’s closing costs would increase by 19%, increasing the number of eligible Black and Hispanic/Latino renters who qualify for a mortgage. are reduced by 14% and 11%, respectively. , compared with 8% of non-Hispanic/white renters, the study authors found.

Perhaps the biggest myth spread by critics is that buyer brokers are truly worthless in the Internet age. Buying a home is often the most important and important financial decision a person will make in their lifetime. The role of the Buyer Broker is to help the American consumer navigate all aspects of the transaction. From pricing and financing to offers, negotiations and closing deals, buyer brokers are trusted advisors.

Surveys show that buyers want and need that advice very much. Not to mention all the decisions not to make, he says he still wants to use the broker to “help him find the right home to buy.”

The study presents some serious concerns about the implications of changing the way commissions are paid within the real estate market. The change will certainly reduce demand because of its impact on first-time homebuyers. And this change will hurt Black and Hispanic/Latino families the most. Many of them are already facing barriers and have significantly lower homeownership rates than white families.

And at a time when house prices and interest rates are particularly high, our country should work to develop policies and propositions that will increase, rather than hinder, access to the American dream.

The Biden administration is focused on increasing fairness in the housing market, and we applaud their efforts. I hope policymakers realize that, as this study suggests, requiring homebuyers to pay their brokers directly would be a major setback for everyone concerned with housing equity. I’m here.

Leslie Lauda Smith is National Real Estate Association.

This column does not necessarily reflect the opinions of the Editorial Board of HousingWire and its owners.

To contact the author of this article:
Leslie Lauda Smith [email protected]

To contact the editor responsible for this article:
Sarah Wheeler [email protected]

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