Real Estate Investing
Latino Home Buyers Will Be Negatively Impacted with the Cancellation of Seller-Paid Commissions

Latino Home Buyers Will Be Negatively Impacted with the Cancellation of Seller-Paid Commissions

Latino home buyers may have a new obstacle to overcome, the cancellation of seller-paid commissions. The Latino community has been working hard to catch up in the home ownership race. Now with the Sitzer/Burnett Lawsuit and Moehrl v NAR lawsuit, it could potentially add yet another obstacle. Traditionally, sellers have paid for the commissions of both their agents and the buyer’s agents. But, what if that practice were to change? There would be major consequences and effects on diverse communities, particularly Latino homebuyers. Read on to learn how this change could impact the Latino community and why it’s an issue worth exploring.

The Current System

Latino Home buyers receiving keys to home.

Before we get into the potential impact, let’s talk about how seller-paid commissions work. In a typical real estate transaction, sellers are responsible for paying commissions to both their listing agent and the buyer’s agent. This means that buyers, including Latino homebuyers, usually don’t have to worry about agent fees. Instead, their agent’s compensation comes from the seller’s proceeds at closing.

Latino Home Buyers: A Growing Force in Real Estate

The Latino community in the United States has been growing, not only in numbers but also in the housing market. Many Latino families aspire to homeownership, which is part of the “American Dream.” This has made our community a significant force in the real estate arena. We are finally getting in the game and buying real estate. The Latino community has to overcome many obstacles to access home ownership. So, how might changes in commission structures affect our community?

Potential Impacts on Latino Home buyers

1. Access to Expert Guidance

Cancelling seller-paid commissions will reduce access to Latino home buyers.

For many Latino homebuyers, especially first-time buyers, the guidance of a real estate agent is invaluable. This was especially true for me, as a First Generation Mexican Immigrant. When I was finally able to afford a home, I had no clue what to do. Luckily, real estate agents were there to help.

Real estate agents are a life saver to the the community. They help navigate the complex process of purchasing a home. However, if buyers suddenly have to cover their agent’s commission costs, it may discourage them from seeking professional assistance. This could lead to ill-informed decisions, which increase their financial risks.

2. Diminished Incentives for Latino Home Buyers

Latino home buyers stress over the effects of canceling seller-paid commissions.

Homeownership is a cherished dream for countless Latino families. Yet, changes in commission structures may cast a shadow on this dream. Saving up for a downpayment for a home is difficult enough. Then add the increased expenses associated with hiring a real estate agent on top of that! With the high interest rates and home prices soaring, the added cost could place homeownership further out of reach for some within the Latino community.

3. Vulnerability to Exploitation

Latino home buyers trying to negotiate without representation.

Additionally, without a buyer’s agent to advocate for their interests, Latino homebuyers may find themselves at a disadvantage during negotiations. This is because, real estate transactions involve many different terms to negotiate. For example, repairs, buy down of the interest rate, closing costs, etc. If you don’t know you can negotiate some of these, buyers could be susceptible to exploitation if they lack professional representation.

4. Widening Housing Equity Gaps

The widening gap for Latino home buyers from canceling seller-paid commissions.

It’s no secret that homeownership plays a pivotal role in building wealth and equity (Unlock Financial Freedom with Real Estate Investing). Owning a home is a huge factor that helps build generational wealth. We need it! Unfortunately, disparities in housing equity have historically affected the Latino community. With redlining and other historically racist policies, the housing gap grew. Now as the Latino community is making leaps and bounds to close it, there is another obstacle. Canceling seller-paid commissions could potentially worsen these disparities by reducing access to professional representation and negotiating power.

Navigating Change with Equity in Mind

Latino home buyer family

The Sitzer/Burnett lawsuit has sparked a huge debate. Real estate commissions is a multifaceted issue with significant implications. However, while it may appear to be a cost-saving measure for sellers, it is essential to recognize the potential negative consequences for Latino homebuyers and other marginalized groups. Often, in the quest for change, policymakers and industry stakeholders don’t take the time to understand the impact to minorities. They must consider the equity implications and should work toward solutions that promote fair access to homeownership and professional representation for all.

So what now?

Overall some may see this lawsuit as a good thing, especially if they are the seller. Having been both the buyer and the seller, I can see both sides. Paying the buyer’s commission can cut into your profit, which can be annoying, especially if they offered lower than the listed price.

Althoug, I believe there should be some change to the current system, completely getting rid of seller-paid commissions will make the “American Dream” of owning a home, even less accessible. With the high interest rates, low inventory, and high sales prices, homeownership is out of reach for most.

Regardless, we will have to wait and see what the results are from the lawsuit.

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