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Barbara Corcoran can always be counted on to tell it like it is.
The founder of The Corcoran Group and star of ABC’s Shark Tank told Yahoo! Finance on Wednesday that although she believes the National Association of Realtors’ recent $418 million settlement of commission lawsuits will cause less disruption in the industry than may be expected, it has resulted in “total confusion” across industry professionals and consumers alike.
Barbara Corcoran | Taylor Hill / Getty Images
“Brokers are confused, buyers and sellers are confused, I even think the people who made the amendments are confused,” Corcoran said.
The ex-broker went on to explain that the settlement meant buyers who want representation in a transaction would now have to complete a buyer broker agreement with their agent that lays out how much the agent will charge for their services. She added that the change from the commission, by default, being added to seller fees was likely to ruffle the feathers of experienced buyers.
“Buyers, I know, don’t like to pay for things out of their own pocket,” Corcoran said.
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But because there is incentive for sellers to attract buyers, Corcoran added that she believes sellers will try to “make good” with buyers by covering things like closing costs, in order to “even the score out.”
“So I don’t think the ruling is a big deal, honestly,” Corcoran said. “But the confusion it’s causing is amazing.”
Yahoo! Finance wondered if the ruling could serve to lower home prices, since homesellers would no longer have to pay the 3 percent buyer-broker commission, but Corcoran swiftly said that didn’t seem like a possible outcome.
“Sellers are greedy. It’s a one-time chance to get the most for your house, and you’re not going to give that money away,” Corcoran said.
She added that the inventory shortage is keeping home prices elevated, and if interest rates come down another point by year end, home prices could “go through the roof” because of the buyers that will flood the market.
“I think everybody and their mother and their in-laws is going to come out looking for a new house and the competition is going to be so fierce that house prices will have to go up.”
If buyers want to avoid paying more, Corcoran advised, they should get out into the market now.
As for the low inventory problem, Corcoran said she doesn’t see it dramatically alleviating anytime soon because homeowners don’t want to give up their 2, 3 or 4 percent mortgage rates.
It’s also impossible to know what interest rate will spur homebuyers and sellers to get back into the market, Corcoran said, because rate fluctuations won’t necessarily be the tipping point for consumers, but life changes that force people to move are the only factors that can be relied on.
Despite renting now being more affordable than buying in every major U.S. city, Corcoran said she doesn’t believe the American dream of owning a home is dead yet. But achieving that dream for first-time homebuyers is especially hard in this environment.
“They’re the hardest hit,” Corcoran said. “They have to compete the hardest, have the least amount of cash to compete, so they’re not making cash offers, and they’re losing four out of the five houses that they’re interested in. I would not want to be a first-time buyer.”
Fortunately, Corcoran did have some advice for first-time buyers who are struggling in this market.
“I’ve done this my whole life,” Corcoran revealed. “Run into a community, see which houses you like, and write love notes on every door.”
With the last four houses Corcoran has purchased, she said she used this tactic when the homes she was interested in weren’t even on the market — and it worked.
Buyer love letters have been considered a controversial tactic, as they can put agents at risk of violating fair housing laws. However, a ban on buyer love letters instituted in Oregon in 2022 was subsequently overturned because it was deemed unconstitutional, suggesting that they are not quite as taboo in the industry as once thought.
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