I have known Steve for over 40 years and respect him as a leader of a consumer organization that represents consumers on policy issues that impact their financial stability. We worked together during my days on the House Banking Committee, working to improve dealing with the federal flood insurance program. We also had several conversations on this issue when I was Vice President for Federal Policy and Industry Relations at the National Association of Realtors.
After reading Steve’s recent op-ed in HW, “Anticompetitive price fixing in real estate commissions is not the answer to fair and accessible homeownership,” I found several points that require clarification. Steve’s assertion that uncoupling real estate commissions will lead to fairer homeownership overlooks significant practical barriers. Let’s address these concerns:
First, Steve’s argument presupposes buyers, especially those at the lower end of the income spectrum, can easily finance agent commissions through their mortgage. This assumption is fundamentally flawed. The reality is that financing commissions are unfeasible. Commissions, often considered a “soft cost,” cannot be easily integrated into a mortgage. Unlike tangible assets, these costs are akin to personal loans with no collateral to recover in case of default.
Adding an additional debt burden to lower-income consumers would leave them in a worse position under the present system, increasing their debt-to-income ratio, making it harder to qualify for a mortgage, and making borrowing more expensive. The idea that buyers could roll these fees into their mortgage is unrealistic and unsupported by evidence.
Moreover, while Steve and the CFA argue that uncoupling commissions will lower transaction fees, which remains to be seen, Steve relies on a flawed assumption that lowering real estate commissions will lower housing prices. As any housing economist will tell you, like other commodities, real estate prices are determined by supply and demand. A housing supply shortage, not real estate commissions, is responsible for high housing costs.
It’s ridiculous to argue that if a seller can save money by refusing to pay a buyer’s agent, that seller will pass the savings on to the buyer as a lower home price. The seller would pocket that money. Isn’t that the reason behind the commission suits—to save home sellers money? If sellers can rely on multiple offers due to a shortage of homes for sale, there is no reason for them to lower the asking price.
In addition, Steve fails to acknowledge the pain this shift creates for vulnerable buyers, those who barely scrape together enough cash to make it to the closing table. The shift disproportionately affects those most in need—first-time buyers, immigrants, veterans, and those lacking generational wealth. More than any others, these consumers rely on the expert guidance of a professional representative to guide them through the most complicated and expensive transaction of their lives.
Your “solution” will result in higher upfront costs for these buyers, who cannot absorb additional expenses without financial strain. Or, buyers may choose to go unrepresented, leaving them vulnerable to predatory practices and increasing the potential for misunderstandings and lawsuits. As the National Fair Housing Alliance and multicultural real estate groups have argued, buyers of color will disproportionately feel these challenges. These challenges will impede our efforts to close the racial homeownership gap.
In Steve’s piece, there’s a tendency to oversimplify the complexities of real estate transactions. Steve’s narrowly focused legal perspective does not reflect expertise in the real estate market or the lived experiences of many potential homebuyers who will be adversely affected.
I urge Steve to reconsider the implications of his stance and engage with stakeholders, both industry and consumers, to address the immediate concerns of those he says he aims to help. Actual progress requires balancing legal theories against the practical realities faced by today’s homebuyers.
Joseph Ventrone is a Senior Consultant for Matrix Rental Solutions and contract Senior Policy Advisor for NAR.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.
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