Big changes came into effect on August 17

Sweeping changes to the way realtors conduct business came into effect across the US on Saturday (August 17) – and that adjustment could have a significant knock-on impact on the mortgage and housing markets, according to a leading mortgage executive.

As part of a much-discussed National Association of Realtors (NAR) settlement, homebuyers will now negotiate directly with realtors regarding payment of fees, while sellers are no longer required to offer to cover the cost of the buyer’s agent.

Anthony Casa, president and chief executive officer of UMortgage, told Mortgage Professional America that the changes were likely to have much more significant consequences than many were anticipating.

Especially concerning, he said, is the fact that many appear unprepared for the “massive shift in behavior” the changes will likely bring about. “The entire real estate agent community is not trained and prepared,” he said. “Of the top five real estate brokerages, only one of them has actually rolled out their plan on how they’re instructing their agents to handle this going forward.”

The changes could prove especially troublesome for buyers who’ve spent several months shopping around for a home without knowing about the impending changes, Casa said – meaning that while they may have been house hunting with a certain budget in mind, the new rules could see thousands of extra dollars added to their closing costs.

In some markets, buyers may still be able to negotiate a seller concession but with affordability already stretched elsewhere for many would-be homeowners, the prospect of even higher mortgage costs is a daunting one.

How will mortgage professionals be impacted?

An exodus of sorts from the real estate agent profession has been mooted as a possible repercussion of the changes, with that trend set to spill over onto the mortgage side, according to Casa. “I think you’re going to see a lot of agents get wiped out [and] I think you’re going to see a lot of loan officers get wiped out,” he said, “because the low-performing agents that are not going to be prepared for this work with low-performing LOs that are not prepared for this.

Kurt Brandly of Greenside Capital stressed the importance of strong referral partnerships in the US mortgage market, noting a shift from high-volume client interactions to cultivating key relationships with realtors, banks, and title companies.

“So it’s going to have an impact on both the mortgage side and the real estate side and I think in the short term, what you’re going to see is… a lot of chaos. You’re going to see buyers on the sidelines. It’s going to be a barrier to entry.”

By Fergal McAlinden 21 Aug 2024