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Homing In | March home prices soft with big changes coming to real estate

By GERI and BOB QUINN - Homing In | Apr 10, 2024

Geri and Bob Quinn

Before we dive head first into this week’s topic about the upcoming changes to the real estate industry’s commission structure and the manner in which business will be conducted between Realtors, buyers and sellers, here is an overview of our local market conditions.

Based on the preliminary numbers for the Cape Coral single-family home market, the total number of closed home sales in the first quarter of this year look like they may end up slightly below the 1,212 sales that were posted in the first quarter of last year. We had a strong month of March with the number of closed sales increasing by more than 35% over a solid month of February, but we are still trying to make up ground from the sluggish sales total back in January. Even with our strong levels of sales in February and March, with over 2,800 active listings still on the market, most sellers will remain disappointed about the lack of interest in their homes.

On this point, price reductions being made by sellers hoping to attract a buyer continue to be the dominant daily market statistic in the MLS. The preliminary median sales price for the month of March in our overall single-family home market was soft, coming in about 2.5% below the $415,000 posted in both March of last year and February of this year, and well below the all-time single month record high of $470,000 set back in April 2022.

As of Tuesday, April 2, there were 2,807 Cape Coral single-family homes listed for sale in the MLS at prices ranging from $225,000 to $10.9 million, with the median list price at $499,900. There was one new construction “home” listed at $125,000 being sold by a small builder, but it was for a prepared lot in the far northwest section of the Cape with all of the permits in place, fill dirt, trusses and other materials present and ready to be taken over to be built by another builder. We would view this situation as the squeeze that some spec home builders are facing in our current incentive-laden new home construction market.

Two weeks ago on March 19, there were 2,880 active single-family home listings in the Cape with a median list price of $499,000. The current number of pending single-family home sales dropped by 5.1% to 802 homes under contract with buyers from 845 homes two weeks ago. The median pending home sales price was virtually unchanged at $419,000 on April 2, compared to $420,000 on March 19.

Several weeks ago we made a brief mention about the recent settlement offer made by the National Association of Realtors on a class action lawsuit about the current structure of real estate commissions. Since the settlement was announced by the NAR everyone has been sifting through the details of the proposed changes, which have yet to be approved by the court. The target date for implementation of the terms of the settlement is in mid-July, and although there could still be some changes made to this settlement, everybody seems to be moving forward with plans to implement these changes ahead of the July deadline.

Basically, in very simple terms, the NAR was hit with a class action lawsuit, followed by a series of “copycat” lawsuits, stating that the current structure of the real estate business and the control over it by the NAR, were antitrust violations that were unfair to consumers. These lawsuits were brought by home sellers who argued two main points about the current process of selling their homes. The first point was that as a seller, they should not be required to pay a commission to the Realtor representing the buyer of their home. And secondly, the NAR’s requirement that the amount of the commission being paid to a buyer’s agent by the seller must be shown to Realtors in the Multiple Listing Service creates a situation where Realtors representing buyers are likely to “steer” buyers to homes paying the agent the highest commission. On this second point, the sellers in this lawsuit argued that if they were paying a lower commission to the buyer’s Realtor, fewer buyers would consider buying their homes, putting that seller at an unfair and unreasonable disadvantage.

Before we get into how this lawsuit settlement will change the way real estate is transacted throughout the country, let’s take a look at the current system. Again, this will be a broad, oversimplified view. First, the vast majority of real estate brokerages and agents in the U.S. are members of the NAR, which gives us the legal right to call ourselves by the trademarked term “Realtors.” The NAR controls most of the Multiple Listing Services from around the country and they set the rules, regulations, guidelines and ethical standards of the real estate industry. The MLS is the primary comprehensive working database used by Realtors from across the country, creating a reliable and streamlined process for providing information about properties that are currently listed for sale, along with a lot of historical information about specific properties and valuable market data. For example, one of the benefits of the MLS is that when we activate a listing in it, the consistent streamlined format of property information, photos, videos, etc., are immediately picked up and displayed by virtually every real estate-related Internet website from around the world. Without the standards set by the NAR and the MLS, it would be like the Wild West on the Internet in the real estate market.

The current commission structure has been in place since the 1990s, whereby the seller agrees to pay the entire commission upon the sale of their home to the listing brokerage firm. The listing broker is then required by the NAR to provide “cooperative compensation” to the buyer’s brokerage firm. All of this is currently negotiable between the seller and the listing broker/Realtor in the listing agreement signed by the seller. There is no set or required amount for the commission that the seller agrees to pay, or how it will be split between the listing broker and the buyer’s broker, or if any additional fees will be charged, or what services will be provided. Everything is negotiable. This structure was designed in an attempt to provide better representation to homebuyers and we will have more on that next week.

Based upon what we know at this moment about the current proposed lawsuit settlement by the NAR, Realtors will be required to have buyers sign agreements before showing them any homes. In these agreements, buyers will have to agree to pay compensation to the Realtor they hire to help them find and buy a home. If the buyer decides to work directly with the listing agent on a home, the listing agent will be required to have the buyer sign a buyer’s agreement with them prior to showing the home to the buyer. On the other side, the seller will have several possible choices they can negotiate with the listing broker/Realtor in the listing agreement. The seller will be able to choose to offer absolutely no compensation to the buyer’s Realtor and just pay a commission or fee to the listing broker. Or the seller can choose to offer compensation to be paid to the buyer’s brokerage in addition to what they agree to pay to the listing brokerage. The amount of any “cooperative compensation” that a seller agrees to pay the buyer’s agent will no longer be allowed to be disclosed to Realtors in the MLS, so agents will potentially be “flying blind” regarding their compensation if they work with a buyer.

We will dig deeper into the complexities and nuances of the new world order in real estate next week, when more of the costs to buy a home could be shifted to the buyer.

The sales data for this article was obtained from the Florida Realtors Multiple Listing Service Matrix for Lee County, Fla., as of April 2, 2024, unless otherwise noted. It was compiled by Bob and Geri Quinn and it includes information specifically for Cape Coral single-family homes, and does not include condominiums, short sales or foreclosures. The data and statistics are believed to be reliable, however, they could be updated and revised periodically, and are subject to change without notice. The Quinns are a husband and wife real estate team with the RE/MAX Realty Team office in Cape Coral. They have lived in Cape Coral for over 44 years. Geri has been a full-time Realtor since 2005, and Bob joined Geri as a full-time Realtor in 2014. Their real estate practice is mainly focused on Cape Coral residential property and vacant lots.