The recent ruling affecting the real estate industry is a blow. Both a good blow, and an ill wind that blows.
It states that Multiple Listing Services around the country whose members subscribe to the National Association of Realtors (most of the MLS’s) can no longer put Sellers in the position of giving commission to agents for Buyers. It’s forcing Realtors and real estate agencies to rethink their commission rates. Many say the 6% often imposed by agencies on Sellers is unfair. It has Sellers paying for the services of agents working with Buyers. Buyers should hire and pay their own agents whatever commission the two agree upon. Sellers shouldn’t shoulder that burden.
While it’s worked that way for eons, fair or not, the ruling also puts the average buyer in a stranglehold. They are already struggling to come up with that 20% down payment, plus attorney fees, title and inspection costs, and finally one year’s worth of insurance premiums. Now they have to come out of pocket several points to pay their Realtor?
Let’s go back to the insurance premiums for a moment. More and more insurance companies across the United States and in the US Virgin Islands – the Caribbean as a whole – are close to denying new policies or have already done so. They are bleeding cash from hurricanes, wildfires, floods – you name it. Buyers looking for that sensational waterfront home on St. Thomas are now facing sensational insurance premiums. And if your St. Thomas dream home is anything less than 100% concrete, with minimal overhangs, and fully shuttered – better rob a bank. Or find a rich relative.
In the spring of 2023 – Realtors across St. Thomas were warned that most insurers were halting new policies and in some cases, pulling old ones. We and our Buyers stumbled through this crisis – some deals falling apart – a few others moving forward with delays, or premiums that compromised on hurricane coverage. Now in 2024 – we are beginning to see the same reluctance on the part of insurers.
Up until recently, securing insurance was one of the last things a Buyer did in the process of closing a deal. Now, it’s the first thing we ask Buyers to do, and many of our sales contracts now give Buyers an out in the event they can’t find affordable insurance.
I wonder if – given the ruling against the Seller paying a buyer’s agent, compounded by the escalating cost of insurance – will there be any Buyers left? Certainly not as many as Realtors and Sellers have been accustomed too. But hey – fair is fair. Isn’t it? Or, is it?