Realtor Commission Changes: What Homebuyers and Sellers Need to Know

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As of August 17, 2024, the real estate industry in the U.S. is undergoing significant changes due to a legal settlement involving the National Association of Realtors (NAR). The lawsuit, which accused real estate agents of price fixing to maintain high commissions, has resulted in new rules that could reshape the way real estate transactions are handled. These changes are expected to bring greater transparency but also new challenges for both homebuyers and sellers. Here’s what you need to know.

 

How Commissions Worked Before

Traditionally, when selling a home, the seller would typically pay a commission of around 5% to 6% of the sale price. This amount was split between the listing agent (representing the seller) and the buyer’s agent. While the seller paid the commission out of their proceeds, this cost was often built into the home’s sale price, meaning buyers indirectly covered these fees through their purchase.

For example, on a $400,000 home, a 5% commission would amount to $20,000, split evenly between the two agents. While this model has been in place for decades, it has come under scrutiny for lack of transparency and inflated costs compared to international standards.

 

What’s Changing?

The most significant change is that listing agents are now prohibited from advertising compensation offers to buyer’s agents on any NAR-affiliated Multiple Listing Service (MLS). Additionally, buyers must now have a written agreement with their agent that clearly outlines the agent’s commission before viewing any property. This shift means that buyers and sellers will need to negotiate agent fees on a case-by-case basis, leading to a more complex transaction process.

Real estate commissions have always been technically negotiable, but the dynamics are shifting. Now, buyers will directly negotiate with their agents regarding compensation, a responsibility that previously fell on the sellers. This change could be particularly daunting for first-time homebuyers, who might already be struggling with high home prices and rising interest rates.

 

Potential Impact on Homebuyers and Sellers

The long-term effects of these changes are still uncertain, and opinions vary widely. On one hand, some industry experts predict a more competitive market, where commission rates could decline, ultimately benefiting consumers. Buyers may have more options and greater control over their costs, potentially leading to significant savings.

However, there are also concerns. The added complexity of negotiating commissions could lead to longer transaction times and increased confusion for buyers and sellers alike. First-time buyers, who often rely heavily on professional guidance, may find it challenging to afford quality representation if commissions are no longer covered by the seller.

Moreover, while the intention is to create a fairer and more transparent process, the new rules might inadvertently result in fewer agents in the market. Some agents may exit the industry due to lower earnings, while others might adopt a more à la carte pricing model, where buyers pay for individual services instead of a comprehensive package.

 

Navigating the New Landscape

For both buyers and sellers, understanding these changes and their implications will be crucial to navigating the new real estate landscape. Sellers might need to reconsider their strategies, possibly offering buyer incentives to ensure a smoother sale. Buyers, on the other hand, should be prepared to negotiate directly with agents and carefully review any agreements before signing.

As the industry adjusts to these new rules, Real Property Management Select remains committed to staying ahead of the curve. We continuously monitor industry developments to ensure that our clients receive the most up-to-date and relevant advice. Whether you’re buying, selling, or managing a property, our team is here to guide you through these changes with expertise and dedication.

For stress-free property management that keeps you informed and in control, follow Real Property Management Select or hire our services today. Let us help you navigate the evolving real estate market with confidence.

Insurance Commissioner Implements Protections for California Homeowners Affected by Wildfires

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As of August 8, 2024, Insurance Commissioner Ricardo Lara has enacted a critical one-year moratorium aimed at protecting over 185,000 California homeowners from insurance cancellations and non-renewals due to recent wildfire emergencies. This order is a significant step in safeguarding those impacted by the Park, Borel, and Gold Complex fires, which have devastated large areas in Northern and Central California.

Overview of the Moratorium

The new moratorium applies to residents within the designated ZIP Codes affected by the fires. This protection ensures that homeowners in these areas are not at risk of losing their insurance coverage for one year from the date of the Governor’s emergency declarations. Importantly, this moratorium applies regardless of whether the homeowner suffered a direct loss from the wildfires.

Commissioner Lara’s initiative is part of a broader effort to address the escalating impacts of climate change on California’s communities. “Homeowners plagued by devastating wildfires deserve the peace of mind that their home and future will remain covered by insurance as they recover and rebuild,” Lara said.

The Department of Insurance will also have staff on the ground in wildfire-affected areas, assisting survivors with claims and providing protection against potential fraud and abuse.

Affected ZIP Codes

The moratorium is in effect for the following areas:

Gold Complex Fire (Effective July 26, 2024):

– 95983, 96103, 96105, 96106, 96109, 96114, 96118, 96122, 96124, 96126, 96129, 96135

Park Fire (Effective July 26, 2024):

– 95915, 95926, 95928, 95929, 95938, 95942, 95943, 95951, 95954, 95963, 95969, 95973, 95978, 96007, 96020, 96021, 96022, 96035, 96055, 96059, 96061, 96063, 96071, 96075, 96076, 96080, 96088, 96090, 96092

Borel Fire (Effective July 30, 2024):

– 93203, 93205, 93220, 93226, 93238, 93240, 93241, 93260, 93283, 93285, 93306, 93307, 93308, 93501, 93518, 93519, 93531, 93561

These ZIP Codes represent areas either directly within or adjacent to the fire perimeters, highlighting the extensive reach of these protections.

Looking Forward

Commissioner Lara’s actions reflect a commitment to finding proactive solutions in response to the growing threat of wildfires in California. Since taking office in 2019, Lara has worked to protect nearly 4 million homeowners through similar initiatives. This latest moratorium is part of a series of reforms designed to improve the sustainability and availability of insurance for all Californians, particularly those facing increasing climate-related risks.

Residents in the affected ZIP Codes are encouraged to stay informed about their rights and protections under this moratorium. The Department of Insurance remains committed to supporting homeowners as they navigate this challenging time.

For more information on this and other protections, visit the California Department of Insurance website.

Navigating the complexities of property management, especially with ever-changing regulations and protections, can be overwhelming. At Real Property Management Select, we take the stress out of managing your property by keeping you informed and ensuring your investments are safeguarded. Stay ahead of the curve with our expert team by your side, delivering seamless, stress-free property management that gives you peace of mind.

Reminder: New Rent Caps in Effect Under AB 1482

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As of August 1, 2024, the updated rent caps under AB 1482, the California Tenant Protection Act of 2019, are now in effect. These new limits, based on the latest Consumer Price Index (CPI) figures for all California counties, will govern how much landlords can increase rents over the next year. It’s essential for both tenants and landlords to be aware of these changes to ensure compliance and understanding of their rights and responsibilities.

Key Changes to Rent Caps

For San Francisco, the maximum rent increase for units covered under AB 1482 is now set at 8.8%. This cap is valid from August 1, 2024, to July 31, 2025, and reflects a combination of a 5% base increase plus a 3.8% adjustment based on the regional CPI. 

Understanding AB 1482

AB 1482 was enacted to provide statewide tenant protections, including limits on rent increases and just cause eviction requirements. The law aims to offer stability and predictability for tenants while ensuring landlords can maintain reasonable returns on their properties.

Key Provisions:

– Rent Increase Limit: Annual rent increases are capped at 5% plus the local CPI, or 10%, whichever is lower. 

– Just Cause Eviction: Landlords must provide a valid reason for terminating a tenancy, categorized as either “at-fault” or “no-fault” causes.

– Notice Requirements: Landlords must notify tenants in writing about the just cause and rent cap protections.

Units Covered and Exemptions

AB 1482 applies to most rental units in California, but there are specific exemptions:

– Units built in the past 15 years.

– Deed-restricted affordable housing.

– Certain dormitories.

– Owner-occupied properties with two units, where the owner lives in one of the units.

Eviction and Rent Increase Guidelines

For a tenancy to be terminated, landlords must have a valid “just cause,” such as non-payment of rent or lease violations. In cases of “no-fault” evictions, such as owner move-ins or substantial renovations, landlords are required to provide relocation assistance.

Rent increases are limited to no more than 5% plus the local CPI, with the current allowable increase in San Francisco set at 8.8%. No more than two increases are permitted within a 12-month period.

Compliance and Legal Advice

While the Rent Board provides information and guidance, it does not have enforcement powers. Tenants and landlords may need to seek legal advice or assistance from tenant advocacy organizations for disputes or enforcement actions related to AB 1482.

Staying updated with the latest changes under AB 1482 is crucial for both landlords and tenants to ensure compliance and protect their rights. At Real Property Management Select, we are committed to keeping you informed and helping you navigate these regulations effectively.

Real Property Management Select is dedicated to providing comprehensive property management services. Contact us today to learn more about how we can assist you in managing your rental properties effectively and efficiently.

The 15 Most Expensive Housing Markets in the U.S.: Real Estate with the Highest Average Home Prices

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The most expensive housing markets in the U.S. have average home prices that are almost three times the national average.

Home prices may have peaked in the summer of 2022, but the most expensive housing markets in the U.S. remain shockingly high.

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index is up 6.29% since April of last year. The 20-city index, which measures only the very largest metro housing markets, is up 7.2% over the same period.

Both indexes have risen approximately 8.65% and 8.55% respectively over the past three years, but experts see mounting evidence that the recent increase in home prices may already be coming to an end.

After nine months of steadily increasing housing prices in the U.S., price growth has now decreased for the second month in a row according to the Case-Shiller U.S. National Home Price NSA Index.

Despite some recent relief, the most expensive housing markets in the U.S. remain exceedingly costly by historical standards and are not expected to get much cheaper anytime soon.

To understand what average home prices look like in the nation’s most expensive housing markets, we turned to the latest data from the Council for Community and Economic Research (C2ER). Their cost of living index measures prices in 265 urban areas for housing, groceries, utilities, transportation, healthcare, and miscellaneous goods and services (such as getting your hair done or going to a movie).

Signs of inflation abound, but home prices are what really stand out. This year, the increase slowed greatly. As of the beginning of 2024, the average price of a home in the U.S. was $508,666, up from $500,584.

Most Expensive Housing Markets in the U.S.

With C2ER’s data, we identified the 15 most expensive housing markets in the U.S. — and the premiums home prices command relative to the national average. (Spoiler alert: the 15 U.S. cities with the highest average home prices have an average home price of $1.34 million, or 2.7 times the national average.)

Here are the U.S. cities with the highest average home prices. For good measure, we’ve also included data on median household incomes, average rents, related housing costs, and other pertinent information.

Data Source: C2ER’s Cost of Living Index, 2023 Third Quarter Data, published October 2023. Index data is based on average prices of goods and services collected during the first three quarters of 2023, with index values based on the new weights for 2023. Population data, household incomes, home values, poverty rates, and other demographic information are from the U.S. Census Bureau.

  1. Oakland, California

– City population: 430,531

– Median household income: $93,146 (U.S.: $74,755)

– Average home price: $920,364 (U.S.: $508,666)

– Premium to U.S. average: 77%

Oakland, neighboring Berkeley and within commuting distance to San Francisco, attracts foodies, culture seekers, and nature lovers. Oaklandites pay 77% more than average for housing-related expenses. The Port of Oakland is the busiest port in Northern California. Despite robust public transportation options, transportation costs for Oakland residents are 44.6% higher than average.

  1. Bethesda, Maryland

– City population: 68,522

– Median household income: $158,720

– Average home price: $1,017,353

– Premium to U.S. average: 91.4%

Bethesda, an upscale D.C. suburb, is home to the National Institutes of Health and Walter Reed National Military Medical Center. While healthcare costs are 5.8% lower than the national average, residents pay a 91.4% premium for housing.

  1. Arlington, Virginia

– City population: 234,000

– Median household income: $132,380

– Average home price: $1,057,671

– Premium to U.S. average: 103%

Arlington, home to the Pentagon and Arlington National Cemetery, boasts an average home price exceeding $1 million. Housing-related expenses are more than twice the national average, with mortgage payments topping $5,000 a month.

  1. Seattle, Washington

– City population: 749,267

– Median household income: $115,409

– Average home price: $1,068,450

– Premium to U.S. average: 109.2%

Seattle’s booming tech scene and limited housing inventory have driven prices up. While prices have cooled over the past year, Seattle remains one of the priciest markets with housing costs 109.2% higher than the national average.

  1. San Diego, California

– City population: 1,381,182

– Median household income: $100,010

– Average home price: $1,092,324 

– Premium to U.S. average: 110.9%

San Diego offers an ideal climate and outdoor activities but at a high cost. Average home prices exceed $1 million, and rent averages $3,210 a month, significantly higher than the national average.

  1. Boston, Massachusetts

– City population: 649,768

– Median household income: $86,331

– Average home price: $999,000 

– Premium to U.S. average: 112.8%

Boston’s high concentrations of universities, hospitals, and tech companies make it an appealing place to live. However, average home prices are almost twice the national average, with principal and interest payments on mortgages doubling the U.S. average.

  1. Queens, New York

– Borough population: 2,278,029

– Median household income: $80,577

– Average home price: $1,097,857 

– Premium to U.S. average: 129.5%

Queens has become trendier, driving prices up. The average home price is nearly $1.1 million, and housing-related costs are 129.5% greater than the U.S. average. Renters also face steep costs with average rents of $3,424 per month.

  1. Los Angeles, California

– City population: 3,822,224

– Median household income: $76,135

– Average home price: $1,279,270

– Premium to U.S. average: 133.3%

Los Angeles is known for its glamor, but high living expenses, especially in housing, make it one of the most expensive U.S. cities. The average home price is $1.28 million, with median home values and rents significantly higher than the national average.

  1. Washington, D.C.

– City population: 671,803

– Median household income: $101,027 

– Average home price: $1,220,500 

– Premium to U.S. average: 135%

Washington, D.C., has an average home price of $1.22 million, making housing costs 2.35 times the national average. While groceries and utilities are slightly above the national average, transportation expenses are relatively affordable.

  1. Orange County, California

– County population: 3,151,184

– Median household income: $106,209

– Average home price: $1,464,488

– Premium to U.S. average: 159.7%

Orange County, with several large municipalities and smaller enclaves like Newport Beach, has an average home price of over $1.46 million. Housing costs are 159.7% higher than the national average, although healthcare costs are lower.

  1. San Francisco, California

– City population: 1,537,618

– Median household income: $139,873

– Average home price: $1,401,754 

– Premium to U.S. average: 174.9%

San Francisco’s tech-driven growth has made it one of the most expensive housing markets in the U.S. Average home prices are $1.4 million, with median home values and rents significantly higher than the national average.

  1. Brooklyn, New York

– Borough population: 2,590,516

– Median household income: $73,951

– Average home price: $1,344,600 

– Premium to U.S. average: 176.5%

Brooklyn, a metropolis in its own right, has average home prices of $1.34 million and housing-related expenses almost triple the national average. Median home values are also significantly higher than the U.S. median.

  1. Honolulu, Hawaii

– City population: 343,437 

– Median household income: $82,006

– Average home price: $1,506,727 

– Premium to U.S. average: 196%

Honolulu’s tropical climate and geographic isolation contribute to its high housing costs. Average home prices are over $1.5 million, and renters pay an average of $

3,100 per month, making it one of the most expensive housing markets in the U.S.

  1. Manhattan, New York

– Borough population: 1,636,142

– Median household income: $91,496

– Average home price: $2,085,739 

– Premium to U.S. average: 229.4%

Manhattan, synonymous with high living costs, has average home prices over $2 million and housing costs 229.4% higher than the national average. Renters pay $5,300 per month on average, highlighting the borough’s extreme cost of living.

  1. San Jose, California

– City population: 982,740

– Median household income: $136,807

– Average home price: $2,062,343 

– Premium to U.S. average: 242%

San Jose, the heart of Silicon Valley, tops the list with average home prices of over $2 million. Housing costs are 242% higher than the national average, driven by the city’s tech industry growth and limited housing inventory.

These 15 cities demonstrate the extreme housing market variances in the U.S., reflecting economic disparities, regional desirability, and local housing policies. For those considering a move, understanding these costs is crucial for financial planning and quality of life assessment.

At Real Property Management Select, we are dedicated to providing you with the latest insights and data to help you navigate the complex real estate landscape. Whether you’re looking to invest in property or manage your existing investments, our expertise can guide you through the most challenging markets. Contact us today for personalized advice and support tailored to your real estate needs.