New rules come into effect in July
As the fallout continues from the National Association of Realtors’ (NAR’s) bombshell commission lawsuits settlement, questions linger over how mortgage professionals will be impacted by upcoming changes in the organization’s practices.
Among the biggest adjustments to take effect in July will be the requirement that real estate agents and brokers negotiate compensation directly with their clients, a departure from the previous practice whereby listing brokers entered a number into the MLS’s “offer of compensation” field.
That means buyer agents will no longer be automatically paid by listing brokers. Instead, all forms of compensation are to be negotiated directly between agents and their clients.
In a November post for Forbes, Matthew VanFossen, chief executive officer of Absolute Home Mortgage Corp., said consumers may decide that listing agent marketing services are less important – partly due to the rise of digital homebuying, and partly because housing supply has fallen sharply.
With the buyer agent role diminished, that could see real estate agents veer towards “dual representation” according to VanFossen – acting both as the seller and buyer agent in a transaction. “This offers a window of opportunity for loan officers who have experience navigating the preapproval process for buyers,” he said.
Loan officers may choose to pair with listing agents to assist in that process as buyers submit offers – and buyer agents could also consider becoming licensed loan originators, VanFossen added, “[teaming] up with loan officers and [becoming] employees of lenders, thus collaborating to handle applications, collect documentation, prequalify buyers and structure deals.”
Could the changes complicate matters for homebuyers?
Mike Rankin (pictured, top right), president at Clearpath Mortgage Solutions, said he’s been having conversations “nonstop” with agents about the upcoming changes – and noted that they could create some additional hurdles for buyers.
“I think it makes things more complicated for the buyer. It’s a struggle, because mortgages and buying a home are already complicated and now that buyer has to potentially navigate some additional complexities: ‘How am I going to pay my agent? Is my agent worth having? If I go to the listing agent directly, do I lose representation?’
Caution and trepidation about buying a first home are entirely natural – but the current crop of new entrants to the market seem increasingly ready to take that risk, said Rebecca Richardson of Kind Lending.https://t.co/AVj5LcCUiE#mortgageindustry #homeownership
— Mortgage Professional America Magazine (@MPAMagazineUS) April 17, 2024
“As a loan professional, I’m very mindful of the fact that we could see more direct to consumer. I think some companies that are direct to consumer have an opportunity to leverage the heck out of the NAR lawsuit because they’re not reliant upon realtors.”
If buyers’ agents are able to work the changes to their advantage, that might see fewer referrals – but the upcoming adjustment also presents an opportunity for brokers to engage realtors and buyers, Rankin added.
“If they choose to go to the listing agent directly or they choose not to use a buyer’s agent, there’s opportunity to provide them that value and to support them,” he said. “I don’t need an agent to be involved to help a client. So I can help support the agent and validate and verify their fee there.
“I do believe in buyer’s agents. I believe that people want and need a buyer’s agent. So I think there’s opportunity everywhere. I’m open to the [chance] that I might need to get referrals from listing agents or more direct to consumer. We’re definitely pushing into growing our referral business from our past clients as a real focus.”
Proactivity the name of the game for brokers amid impending rule changes
Jennifer Gormer (pictured, top left), president and chief executive officer at Integrity Home Lending, told Mortgage Professional America that she had seen an influx of calls in recent weeks about the profound changes realtors were likely to see in July, including how the new rules are likely to affect the loan estimate, closing disclosure (CD) and related costs.
“We even have borrowers call us and say, ‘Hey – we’ve heard about this thing called NAR, what does it mean?’ I think that’s also what’s really big right now. People are just trying to understand it,” she said. “And other people just want to make sure that they still get paid for doing their job.”
Gormer said an even bigger onus is now on loan officials to make sure that they’re getting the job done and closing borrowers on time. “I think it’s truly going to affect how realtors do business. But we, as mortgage brokers, also have to know and be proactive,” she said.
“So when July comes, be able to explain [the changes] to customers who have a buyer’s agent. Be prepared for it, and don’t wait until July to figure it out.”
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