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Realty Connect USA

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By Samantha Rutt

A significant shift is coming to Long Island’s real estate market, with the National Association of Realtors agreeing to a settlement that could alter how buyers and sellers pay their agents.

In mid-March, the NAR reached a settlement agreement with home sellers who argued that NAR policies unfairly inflated commission rates. While the details are still being finalized, the agreement is set to impact the real estate market, both for buyers and sellers.

For years, the NAR faced lawsuits alleging their rules for Multiple Listing Services — the system where homes are advertised — restricted competition and kept commission rates artificially high, allegedly violating U.S. antitrust laws and regulations. 

The settlement, valued at $418 million over four years pending court approval, doesn’t admit wrongdoing by the NAR but allows sellers more freedom in how they offer compensation to buyers agents. Previously, commissions were often set through a system of predetermined splits between listing and buyers agents.

“There’s been a lot of misinformation about the settlement with the National Association of Realtors,” Darryl Davis, a real-estate coach based in Rocky Point said. “There has been no removal of any percent of a commission. To summarize, real estate companies have not been impacted at all because commission amounts, or the percentage, was not part of the lawsuit or the settlement.”

Local realtors are still analyzing the full scope of the settlement. However, early indications suggest a shift toward a more negotiable commission structure.

“Part of the settlement was that there would no longer be an offer of compensation on the multiple listing agreement for the agent that brings the buyer to the property,” John Fitzgerald of Realty Connect USA said. “So now for that agent to get paid, they’re going to have to have a contract with the buyer for compensation and that is changing our industry.”

What this means for buyers and sellers

“It really affects the seller,” said East Setauket-based Michael Ardolino, also of Realty Connect USA. The settlement “affects the sellers and the buyers more than anybody.”

For home buyers, this could translate to potential savings. Traditionally, buyers agents received a set commission, often around 3% of the sale price. Now, sellers may offer a lower commission to incentivize buyers agents to show the property.

However, some industry experts warn this might not be a guaranteed benefit for buyers, especially for those applying for loans from the Federal Housing Administration or Veteran Affairs. 

“The problem is, if the buyer is going to pay the compensation to the agent, you’re not incorporating it into the property — as far as getting it from the proceeds of the sale — [and that] then is going to have an effect on FHA buyers and VA buyers and that’s extreme,” Fitzgerald said. 

“If it’s a first-time homebuyer and they have an FHA, you buy a house with 3.5% down and you can mortgage up to 6% of your closing costs. Now you have to add a brokerage fee on top of that — that might put that buyer out of the market. Same thing for the VA. That might be a little bit difficult for primarily first-time buyers,” Fitzgerald explained. 

For sellers, the impact is a bit more complex. Increased negotiation over commissions could add time to the selling process. On the other hand, some sellers may be able to attract more interest by offering a lower commission to the buyer’s agent.

The road ahead

The Long Island real estate market is known for its competitiveness and this settlement is likely to add another layer to the negotiation process. Ultimately, how this settlement plays out for the Island’s buyers and sellers remains to be seen. However, one thing is certain: The way real estate commissions are negotiated on Long Island is about to change.

The NAR settlement is expected to take effect in mid-July. 

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Michael Ardolino

By Michael Ardolino

It’s been a while since we’ve been able to share our thoughts, and it’s fantastic to be back. I look forward to sharing what’s happening in the real estate market in upcoming columns.

For homeowners looking to sell, this is the time to do it. As more people are moving away from densely populated areas, residents in our communities have seen an increase in demand for their homes.

Why is timing important?

If you’ve been thinking of selling your home, there’s no time like the present, because houses in our area are currently in high demand. 

In a future column, we’ll be watching the trends and sharing more details about supply and demand and what’s best for your situation.

For now, it’s important to know that you have the opportunity to get an excellent return on your investment, and the more money you get for your current house, the more options you’ll have when buying your new home.

Get ready

If you haven’t been part of a real estate transaction in decades, you may not realize how quickly a sale can occur in the age of technology. Many buyers research homes online, and most of them already have their mortgage pre-approval letters in hand. Sellers need to be prepared for their house to sell soon after they list it.

What does it mean to get ready?

Now is the time to sit down and have important conversations with those who understand the market to discuss your options. 

If you’re a seller looking to buy a new home, you not only want to receive the best price for your current house but also get the best mortgage rate for your new home.

When your house goes up on the market, there’s a lot of preparation. Take a good look at your home and ask yourself what repairs do you need to work on in the next few weeks. Does the roof need to be fixed? How about that basement? Does it need to be emptied out? When it comes time to list your home, you want to present it in the best possible condition. So, for example, if you’re looking to sell your house in late summer, now is the time to get moving on repairs and upgrades.

The future looks bright

With COVID-19 restrictions lifting, and as we’re moving away from the pandemic, clients can stop by the office and houses can be shown in-person to clients.

Even if you’re thinking of moving in the fall or early next year, it’s time to consider your wants and needs when it comes to selling your home.

So, let’s talk.

Michael Ardolino is the Founder/Owner-Broker of Realty Connect USA.

Real Estate brokers said people from more urban parts of the state are on the hunt for rustic or suburban homes like this one for sale in Port Jefferson. Photo from Douglas Elliman Real Estate

Go east, homebuyers.

That’s the message people in Nassau County and New York City have heard in connection with home-buying decisions amid the COVID-19 pandemic.

‘A number of people, because of the density of the population, decided they might like to move away from the city life and get to more open space.’

—John Fitzgerald

After the real estate market all but shut down during the worst of the lockdown in the spring, buyers have shown considerable interest in homes for sale in Suffolk County, driven by numerous factors including people leaving the higher-density areas of Manhattan. Additionally, prospective buyers working there have recognized that a remote working environment has given them options further from the city.

“Because of the pandemic, there was a slowdown in the request for housing and the market stopped for a while,” said John Fitzgerald, an owner and broker with Realty Connect USA, which is headquartered in Hauppauge. Once the market returned, “a number of people, because of the density of the population, decided they might like to move away from the city life and get to more open space,” he added.

With more buyers than houses available, bidding wars erupted. Prospective buyers also benefited from low interest rates, as people shopped for homes based on the monthly cost to build equity in their homes, rather than absolute price.

In some cases, within 10 minutes of a seller listing a house on the market, the phone started ringing for agents, Fitzgerald said. Prospective buyers and agents are calling or reaching out through the internet soon after some new listings appear on the market.

“It doesn’t matter the time of the day or the evening,” said Setauket-based Michael Ardolino, who is also an owner and broker at Realty Connect USA, which has offices throughout Long Island.

The prices for some homes have increased during the course of the year.

“If you’re selling something in February for one price, here we are in September, you can see a price difference,” Ardolino said. “Clearly, people are getting more money.”

Indeed, one home seller, who preferred not to use her name, said she put her house on the market in May but due to the pandemic nobody could come see it.

That, however, didn’t stop people from showing interest as numerous calls were made to her. She even received an offer from someone who hadn’t been in the house.

The offer that the seller eventually accepted was higher than the asking price. The sale closed only a few months after she put the home on the market.

With homebuyers expecting to use their houses for leisure and remote working, Fitzgerald said builders are already considering altering their architectural designs. Instead of a large den, some builders are exploring the potential for two private offices.

“In brand new construction, that will become more of a desired piece when people shop,” he said. Additionally, people may start looking for separate entrances, allowing them to minimize the noise and traffic that comes through their offices.

Some buyers are looking for an area where they are close enough to be in walking distance to town, but don’t want to be in the middle of town.

Catherine Quinlan of Coldwell Banker has also seen high demand for homes, particularly in Port Jefferson — one of her areas of expertise, where the inventory isn’t especially high.

Houses are “selling fast if they’re priced right,” she said.

While the supply-demand curve is tilted toward sellers, the pricing power isn’t extreme. She said sellers might get an extra $10,000 to $20,000, but that they aren’t collecting an additional $100,000.

Buyers are not only looking for office space to work at home, but are also interested in pools. If there isn’t a pool, buyers are asking if there’s enough room to build one.

In other markets, some folks may not want pools, but the current uncertainty about travel, vacations and even the availability of community pools has encouraged some buyers to add them to their shopping list.

Fitzgerald said the demand for pools is high enough that there is a waiting list to buy both in-ground and above-ground pools.

For one home she wasn’t showing, Quinlan was surprised to see a bidding war.

Houses that would have been on the market for months because of the condition are selling in a market in which buyers are willing to “work with a house” to accommodate their needs and to upgrade amenities or even rooms, she said.

Homes that are in the $400,000 to $500,000 range in particular are finding receptive buyers.

For prospective buyers who might be waiting for prices to come down, Fitzgerald suggested that the other side of the cost is interest rates.

“If the rates went up 1%, [buyers] could pay $40,000 to $50,000 more for the home,” he said, so they wouldn’t necessarily have saved by waiting.