^{April 08, 2024 | Reading Time: 4 Minutes}

Well, imagine real estate investors as the hip dudes sitting in the back row of the theater, watching the drama unfold on stage with a knowing smirk. The $418 million real estate settlement is like a plot twist they didn’t see coming, but we are already thinking three moves ahead.

First: with the potential changes in commission structures and negotiation processes, investors might find themselves with more wiggle room to strike deals. As buyers and sellers become more aware of their options, investors could find themselves swimming in a sea of motivated sellers eager to offload properties.

Second: let’s not forget the potential shift away from MLS towards alternative transactional options. This could open up new avenues for investors to explore, from off-market deals to creative financing arrangements.

Investors now have more advantages when it comes to compensating agents, often driven by factors such as price and location. Let’s dive in.

To begin with, investors may still adhere to the conventional model of paying a standard 5-6% commission split between the listing and buyer agent. This approach fosters increased interest from buyer agents, who are assured compensation. Consequently, more showings leads to a higher likelihood of receiving offers meeting or exceeding the asking price. Unlike homeowners who tend to lean towards paying only their listing agent, investors are more focused on competitiveness and moving their properties.

This dynamic is particularly evident with first-time homebuyers, especially those struggling with the challenge of gathering funds for the down payment and closing costs. In markets characterized by lower income brackets and properties priced under $200,000, the majority of first-time buyers often require financial assistance. They heavily rely on seller concessions to help defray closing costs. Expecting this demographic to cover buyer agent fees may not be realistic. Many investors operating in such markets have already factored in commissions and seller concessions into their profit margins, a strategy they are likely to continue to maintain a competitive edge.

In areas marked by high demand and limited listings, investors may choose to solely compensate their listing agents, rightly assuming that most of these buyers have the financial resources to pay buyer agents. By saving on commissions, investors stand to reap substantial higher profits over time. This is especially true where asking prices exceed $500K. However, there may still be investors who opt to compensate buyer’s agents, with the goal of increasing interest, attracting multiple offers, and receiving offer surpassing the asking price. Ultimately, paying buyer agents for luxury properties could still potentially yield more income, even after factoring in the extra commissions. We see may of these investors split testing this strategy to see which is most effective.

Contrary to assertions by some news pundits regarding impending price drops, such scenarios appear to be wishful thinking. They suggest that sellers factor commissions into their asking prices to offset the cost of paying them. However, seasoned agents and investors typically base their pricing decisions on a comprehensive analysis of the comparable properties, availability of listings, days on market, etc. As long as inventory remains low and interest rates continue to drop, sellers and investors are unlikely to lower prices.