SAN ANTONIO – New rules for Realtors around the nation could mean changes for homebuyers and sellers after a $418 million settlement against the National Association of Realtors.
Juanita Ortega, a Realtor with Premier Realtor Group, said there have been many questions and misinformation about the changes and how they will impact the homebuying process.
The changes surround the commission that sellers and agents share. Ortega said the fee has always been negotiable, ranging around 4% to 7%.
“That commission that they agree to pay me is the budget that I have to be able to market their home, and I will offer part of that commission to a buyer’s agent to bring me a qualified buyer,” she said.
The first proposed change is that listing agents can no longer post how much they offer a buyer’s agent on Multiple Listing Services (MLS), a private database created and maintained by local real estate boards.
“That’s something that will have to be negotiated between the agents,” Ortega said.
Starting in July, before a buyer can be shown a listing, their agent must sign a representation agreement with the selling agent.
“That is a contract between those two people that says, ‘Look, we’re working together to try and reach this common goal and work towards your best interest,’” Ortega said.
Realtor Anthony Sharp said there are still questions about how the changes might impact veterans buying a home.
“We need to polish up how they pay commission right now. The (Department of Veterans Affairs) is not allowed to pay commission,” Sharp said. “Sellers don’t know that they don’t see that side of it. So how else do they get representation?”
Sharp said the prices of homes are likely to remain the same.
“In a nutshell, will it impact home pricing? It’s not going to impact home pricing at all. Supply and demand is always going to prevail.”
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Buying a home is expensive these days, but not just because of sky-high prices and burdensome mortgage rates—costly commissions for real estate agents are eating into homebuyers’ bottom lines too. In fact, Americans pay roughly $100 billion in real estate commissions annually, according to a 2023 Keefe, Bruyette & Woods analyst report. But the good news, at least for anyone who isn’t a real estate agent, is a new working paper titled Real Estate Commissions and Homebuying suggests that roughly $30 billion of U.S. real estate agents’ commissions could be slashed by using a new compensation model.
In the paper, Richmond Federal Reserve Bank senior economist Borys Grochulski and vice president of research Zhu Wang argue that the U.S. model for real estate commissions is “puzzling” and an “anomaly” when compared with other systems abroad. The pair note that home sellers in the U.K., Ireland, the Netherlands, Singapore, Sweden, and Norway pay less than 2% in commission to their real estate agents on average, compared to 5.5% in the U.S, according to a 2015 study.
As for buyers, a large portion in many countries, including Australia, Canada, and Denmark, purchase properties without agent representation, while 87% of homebuyers use an agent in the U.S, according to National Association of Realtors data. That’s a huge percentage of Americans choosing to use buy-side agents considering half of all buyers find their own homes online anyway.
All of these issues with real estate agents’ current compensation model contributes to “elevated home prices, overused agent services, and prolonged home searches,” according to Wang and Grochulski. In order to correct the problem, the economists proposed a new “à la carte” model for buy-side real estate agents that could reduce buyers’ commissions by roughly $30 billion.
“The results suggest that switching to a cost-based commission model…may increase U.S. homebuyers’ welfare by more than $30 billion a year,” Wang and Grochulski write, noting that “most of the consumer welfare gains would come from the redistribution of buyer agents’ profits.”
The à la carte compensation model would require both homebuyers and sellers to pay their own agents separately—and independent of the final home price in the transaction—in order to prevent something called “steering,” where agents tend to direct their clients away from properties that have low commissions.
The model would also force homebuyers, but not sellers, to pay for each task that their agent undertakes individually, whether it’s searching for a home, helping with negotiations, or showing properties—hence the à la carte name. The economists argue that this would enable consumers to shop around for individual buyer-agent services, and even haggle for a better price. “Under such a system, competition among agents would likely align agent compensation with cost, and buyers would not overuse agent services,” they write.
The new paper from the Richmond Fed comes at a difficult moment for real estate agents. The National Association of Realtors and several national brokerage firms are facing multiple lawsuits alleging collusion to inflate real estate agent commissions. This, after a jury in Kansas City sided against NAR last fall in a similar case, leaving the organization with a $1.8 billion judgment (which it plans to appeal).
The pressure on real estate agent commissions has been so intense that it even prompted the noted short-seller Spruce Point Capital to put out a short report on Zillow, the real-estate marketplace that derives a large portion of its revenues from buyer agent commissions, warning that the company’s stock price could drop up to 60%. One of the major issues the short-seller cited was analysis that shows recent lawsuits could change the way buyer-agent commissions are handled, leading the total addressable market of commissions to drop as much as 30%.
Still, in spite of the negative impact of changing the current compensation structure for the real estate industry, Wang and Grochulski believe that a new model for commissions is necessary and their à la carte approach would likely be the best option for the economy as a whole. From eliminating agents’ incentive to “steer” clients away from low-commission homes and increasing “housing search efficiency,” to enabling buyers to use multiple agents throughout the homebuying process (putting agents’ time toward “more productive uses”), the economists lauded their model’s potential benefits. “We propose that policymakers may consider shifting to an à la carte model,” they concluded.
The continued run-up in home prices last year as the U.S. economy avoided entering a much-feared recession represents a huge increase in wealth for homeowners but a “massive problem” for first-time homebuyers, economist Mark Zandi said.
The chief economist of Moody’s Analytics added that the U.S. economy had a stellar year in 2023. The latest evidence contained in the company’s sales house price index for December shows that home prices were up 5 percent compared to a year before and almost 50 percent since just before the pandemic. Newsweek contacted Zandi for comment by email on Monday morning.
The report, released a few days ago, shows that house prices were up 5.14 percent in December 2023, compared to December 2022, despite stubbornly high mortgage rates and low housing affordability.
House prices dipped between late summer 2022 and spring 2023 as many homebuyers were squeezed out of the market by skyrocketing home prices and high mortgage rates; these were driven up by the Federal Reserve’s aggressive interest rates hike to bring down inflation. From an historic low of 2.5 percent during the pandemic, mortgage rates are near the 7 percent mark now, according to Zandi.
However, prices started recovering at the beginning of summer 2023 as inventory remained critically low. Moody’s Analytics’ data shows a steady surge in home prices between June and December 2023. The document states that price appreciation was the strongest among the most-affordable homes.
Zandi wrote on X, formerly known as Twitter, that house prices are off from their all-time highs in and around Texas and the Pacific Northwest, but only modestly, while they continue to push higher in the Northeast, and industrial Midwest and Southeast. Zandi added that in Philadelphia, his hometown, house prices were up 7 percent in December 2023, compared to a year before.
“For the two-thirds of Americans who own their home, the higher prices mean a massive increase in their wealth,” Zandi wrote. “But of course, this is a massive problem for potential first time homebuyers. Given the collapse in affordability, buying a home is not even remotely possible.”
Increasing the housing supply is an urgently needed solution to help renters become homeowners and stabilize the housing market, according to Zandi.
“No faster way than for Congress to pass the tax legislation they are debating, which includes more support for the low income housing tax credit,” the economist wrote on the social-media platform.
Democrats and Republicans in Congress have recently come together to support a $78 billion bipartisan tax overhaul—known as the Tax Relief for American Families and Workers Act of 2024. This would give a boost to the Low-Income Housing Tax Credit (LIHTC) program, which would help lower-income tenants to get on the property ladder. The LIHTC is the main federal tool for financing the development of affordable housing in the country.
The same proposed legislation would also open up more opportunities for states to build additional housing, fixing the existing gap between offer and demand.
Uncommon Knowledge
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
Newsweek is committed to challenging conventional wisdom and finding connections in the search for common ground.
It looks as though Wall Street has given up on residential real estate. In 2021 and 2022, investor enthusiasm seemed to know no bounds. They poured billions into the area, eager to cash in on soaring rents. According to John Burns Research & Consulting, large landlords at the height of that boom bought almost 2.5% of all U.S. homes. But since, the tide has ebbed, with landlords taking a mere 0.4% of U.S. homes during this year’s second quarter, the most recent period for which complete data are available. By comparison, individual homebuyers have kept up their interest. The pace of buying has wavered from month to month as home prices and especially financing costs have risen, but any hesitation caused by cost considerations hardly compares with investors’ sudden pullback.
These fundamentally divergent trends naturally raise questions about which group is correct. Has Wall Street’s smart money issued a warning that individuals have failed to receive or do these individuals know something more than the big investors? The question is both natural and informative, but the fact is that these groups are not moving at cross purposes. Big money and individuals are playing almost entirely different games. The calculations of one have little relation to the calculations of the other, and the way it looks now, both are quite rational.
From the investor’s point of view, there is ample reason to pull back. In the last year and a half or so, financing costs have risen almost five full percentage points, while, according to the Census Bureau, the median price of a home sold in the United States has risen almost 8.5%. At the same time, rent increases have slowed markedly. Data provided by iPropertyManagement, shows average rents nationally, after rising a striking 12.1% from 2019 to 2021, actually fell over 9% in 2022, and in 2023 remain below the 2021 highs. The return on residential real estate investments has suffered accordingly, leaving little wonder why real estate investment trusts (REITs) and other investors have lost their appetite for further buying. Indicative of the situation and a general expectation that things might get worse is how shares of single-family REITs now trade at a 20% discount to their gross asset value.
Some of these considerations do matter to individual homebuyers. The National Association of Realtors (NAR) compares household incomes to financing costs and home prices to calculate what it calls an “affordability index.” That calculation indicates that affordability has fallen some 17% over the last 12 months. No doubt these facts discourage prospective homebuyers and may price some people out of the market. But rather than abandon the area, as the big-money boys have done, these increased costs more likely cause people to slide down the price distribution to buy less house in perhaps a less desirable location than they had originally planned. They have stuck as best they can because other considerations – that do not apply to investors – motivate individual homebuyers.
One on those considerations is an ongoing physical need. Over the past 18 years, according to the Census Bureau, the United States has seen family formation increase more than 3%. Because net home construction has not kept up, the nation faces more people seeking a single-family home than are available. These people will pay up if they can rather than continue to share or live in cramped quarters. Related to this is the intangible but nonetheless significant motivation to stive and, if necessary, stretch to give one’s family what it wants and in the eyes of every breadwinner deserves.
Individual homebuyers – sometimes explicitly, sometimes implicitly — also make a crucial calculation that investors do not. In the inflationary environment that presently grips this economy, ownership offers a tremendous advantage even if it involves supporting a high-rate mortgage. Once things are settled, whatever the number, the cost of shelter remains fixed. It is worth a lot to any family to fix the price of a big household budget when all other living costs are rising, some might say unpredictably. It is even worth stretching today’s budget to do so.
This last consideration is no doubt why during the last great inflation in the 1970s and 1980s, a time when mortgage costs were astronomical, that homebuying continued, despite the high costs. Indeed, that buying was sufficient to propel housing prices up even faster than inflation. The Labor Department records that consumer prices rose on average a disturbing 6.2% a year between 1970 and 1990. Housing prices the Census Bureau reports, rose during this time 8.6% a year. It was worth it to fix that budget item even if it meant an initial financial stretch.
Comparisons of behavior in disparate parts of the economy are always dicey. It certainly is in this case. The investors are not necessarily wrong and certainly look rational according to their own calculations. The same is true for individual homebuyers according to their very different valuation calculations.
Real estate apps have been around for over 10 years now — and it seems like new ones come out as regularly as homes come to market. As their numbers grow, so does their variety: In addition to applications for buying, selling, and renting real estate, there are now platforms for obtaining mortgages, investing in real estate, and even designing a house.
Here are the nine of the best real estate applications on the market today.
What are real estate apps?
Real estate apps (short for applications) are a one-stop shop for prospective tenants, home buyers, home sellers, home owners and investors — not to mention the folks who like to just browse. They consist of databases with thousands — sometimes even millions — of properties, like a vast, location-spanning multiple listings service (MLS).
Most of these mobile apps make their money by charging a listing fee, selling ad space to Realtors or contractors, or taking a cut of the sale price or rent. Some are backed by real estate companies or brokerages, like Zillow and Redfin. Others are independent.
Types of real estate apps
The majority of real estate applications are focused on the house-hunting and renting experience. They’re a place for buyers to browse homes for sale or rent and a place for sellers and landlords to do market research, and list their properties for sale or rent.
There are real estate apps that focus on commercial properties to buy, sell or lease. Some provide directories of real estate agents and brokerages; others are oriented towards lenders and financial services. Rising in popularity of late have been apps geared real estate investments and home design.
Zillow
Best for initial research for home buying, renting, or selling
One of the most well-known and highly rated real estate search apps, the free Zillow app gives users access to a wide range of properties with detailed filter criteria. Through the app, you can coordinate your search for a home with someone else, meaning you or your roommate or partner can share your favorite finds easily.
The Zillow app does have a few flaws, however. Zillow’s “Zestimate,” its home evaluation tool, doesn’t always give an accurate picture of a home’s value, especially when details are missing from a listing. Real estate agents can also pay to have themselves featured as a contact for a property, even if they aren’t the actual listing agent, which can confuse things for homebuyers.
Pros:
- Most widely used application
- Can find homes for sale or for rent
- Can view sale price history for the whole neighborhood
Cons:
- Sometimes flawe price estimates and rental estimates
- Your information may be sold to lenders and Realtors
- Asking questions can lead to wave of unsolicited emails
Redfin
Best for saving on commissions
If you’re seriously home-hunting, the Redfin app can be a useful tool. Redfin is a real estate brokerage, so in addition to searching for properties through the app, you can go ahead and buy one with a Redfin agent and receive a portion of the agent’s commission back. If you sell your home and buy another one with a Redfin agent, you’ll only pay a 1% listing fee for your home, saving you from the standard 3% on both transactions.
The Redfin app also offers home value estimates, which might be more accurate than Zestimates, but still aren’t a substitute for an appraisal. Overall, the app is highly rated by users, and it’s free, making it a solid option for house hunters.
Pros:
- Save thousands in commission when buying or selling
- Accurate home value estimates
Cons:
- Limited neighborhood info
- Rental side is new with limited listings
Trulia
Best for getting a feel for a neighborhood
Trulia is actually owned by Zillow and uses information that comes from Zillow, but augments it a bit. Trulia includes features like drone film footage, quotes from people who live in the area, school ratings and walkability scores. Trulia’s home value estimates may be more accurate than Zillow’s because it uses more data points.
Pros:
- Extensive neighborhood data available in the app
- More accurate home estimates
- Easy to identify and contact the listing agent
Cons:
- Not great for home sellers: no agent directory, neighborhood price history isn’t as thorough
- Application can be difficult to navigate
Apartments.com
Best for renters
Are you looking for a rental? The Apartments.com app can help you easily unearth your next place. The app offers a streamlined search experience for apartments, condos, homes and townhomes, and you can sort through rentals based on unique filters such as wheelchair access, in-unit laundry, pet-friendliness or the addition of a dishwasher.
Although it’s free to browse rentals through the app, you’ll run into a fee if you want to apply for one directly through the platform. The in-app rental application costs $29.00 plus tax for up to 10 applications made within a 30-day period.
Pros:
- Apply to many apartments for the same fee
- View many types of rentals in one spot
Cons:
- Limited adoption outside of metropolitan areas
- No reviews from current or former tenants
Realtor.com
Best for landlords and for most accurate data
Homebuyers and renters alike can gain access to the most (and most up-to-date) listings by using the free Realtor.com app. With an extremely wide selection of properties available, you’re able to see all of the options out there. Realtor.com is also affiliated with the National Association of Realtors (NAR) and has access to a large portion of multiple listing services, so its listings are usually refreshed quicker compared to other sites.
Realtor is the only application on our list that lets landlords list rentals and take applications for free. So it might benefit you if you’re thinking about leasing that garage apartment or guest house or a second home.
In addition, listings on the Realtor.com app include handy information and filters, like the noise level of a neighborhood or commute time, which can be helpful when looking for a place to call home.
Pros:
- Updates the quickest: best spot to find brand new listings and see when something is sold
- Commute and noise level data in app
- Free rental listing and applications
Cons:
- Can’t filter results as thoroughly as other apps
- No easy way to see neighborhood home values
LoopNet
Best for commercial real estate
Residential real estate isn’t the only game in town. If you’re looking for a commercial property, the LoopNet app can help you find the perfect fit, and more information than what would be available on other apps geared toward residential homebuyers. You can easily search based on the type of commercial property you’re looking for, including office, retail, restaurant or multifamily dwelling.
One drawback that seems to be an issue among users, however, is the inability to save your search within the app. That means you’ll be forced to re-enter your search filters every time you want to explore listings.
Pros:
- Easy to find commercial properties for rent and for sale
- Thorough details in property listings
Cons:
- Only lists properties, not businesses that are for sale
- Limited tools like rent forecasts and loan calculators
Landa
Best for beginning real estate investors
The Landa app allows users to invest in real estate with as little as $5. Users can view rentals available to invest in and buy shares in properties. The application has an interface that allows you to see your real estate portfolio all in one place and updates you when you receive your share of the rental income.
Pros:
- Easy to find investment properties
- Low financial cost to get started
Cons:
- Limited real estate investment education within the application
- Newer company, limited track record
Rocket Mortgage
Best for financing
Rocket Mortgage is one of the top home loan lenders in the country. They have developed an industry-leading application that allows you to do most of the process on your phone. You can get pre-approval for a mortgage, submit documentation for underwriting, and e-sign your documents all in the secured application.
Pros:
- Streamlines the lending process: You can prequalify, submit documents and sign them all in the application
- Can submit mortgage payments on the app
- Includes affordability and payment calculators
Cons:
- Limited in-app financial education
Houzz
Best for people designing and building homes
Houzz is ideal for anyone designing their own home. The app allows you to decide layouts, color palettes and more. It can connect you with contractors, designers and builders all in one place. It even has a shopping cart where you can pick out furnishings and lighting fixtures, and have them shipped directly to your build site.
Pros:
- Connects you with local construction professionals
- Presents digital mock-ups of how things will look in your home
- Offers high-quality furnishings
Cons:
- High prices for most goods and services
- Potentially limited list of contractors
FAQs
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One prized feature of home buying-oriented apps is the property evaluations they set on listings. They determine home value through proprietary algorithms. These algorithms incorporate data that includes things like recent home sales in the area, age of the home, square footage of the home, number of rooms and any previous sale price of the home — all factors that professional human appraisers often use, too.
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Real estate applications have varying accuracies. The tools used by Trulia, Realtor and Redfin are generally viewed as the most accurate. Zillow’s estimate has become a bit of a joke in the industry.
Also, the apps don’t have a way to know everything that can significantly affect your home’s value — like its curb appeal or its condition. For example, they can’t know if you recently updated the kitchen, or that the carpeted floors are redolent of years of smoking and cats. All of these things can make the sum your home commands on the market quite different by than the estimate their computer came up with.