New Real Estate Rules Could Widen Black Wealth Gap

by KAREN JUANITA CARILLO.

(WIB) – Homeownership remains central to building wealth in the U.S., but Black real estate professionals are cautioning that recent industry shifts could make it challenging for buyers trying to manage the extra costs associated with purchasing a home.

Because of a 2023 federal lawsuit against the National Association of Realtors (NAR), real estate brokers can no longer require home sellers to cover the fees for both the seller and buyer’s agents. That means that home sellers can now negotiate with their real estate agent about whether they want to include a payment to the buyer’s agent in their sale price or not. It also means that buyers will now need to figure out how to pay their own agent’s fees.

The class-action lawsuit that led to that decision may have been designed to ensure fairness for home sellers, but it could also lead to further racial wealth disparities, asserts Dr. Courtney Johnson Rose, the president of the National Association of Real Estate Brokers (NAREB).

NAREB calculates that there are nearly two million mortgage-ready Black homebuyers, who have the income and credit to purchase a home. But they may not have the extra savings or down payment funds needed for extra expenses.

“The class-action suit was brought by consumers, but consumers that are on the seller’s side, not the buyer’s side,” Rose said. “One thing to note is that right now, home ownership in the white community is right around 75% [or] 76%, which is pretty significant. That’s almost pretty much everybody who wanted a house got a house. We compare that to the Hispanic community, which is 49% [or] 50%; the Asian community was at about 54% [or] 55%; [and] the Black community at 44% [or] 45%.

“It’s almost safe to say that the majority of people who are selling properties are white Americans. And the majority of the people with an opportunity to purchase homes are most likely in communities of color: that’s who the homebuyer of today and tomorrow is.”

The new real estate commission changes mean that new homebuyers will not only be negotiating the purchase of a new home, but that they will also have to factor in the cost of any fees paid to their realtor. Some people might be able to negotiate a cheaper fee, but most homebuyers don’t have that ability.

The fee changes place new homebuyers at a disadvantage by requiring them to negotiate realtor fees while trying to purchase a home. This could scare some Black buyers away from using realtors, Rose says, particularly if they are first-time homebuyers. They might think that not working with an agent could save them money. But real estate agents aligned with groups like NAREB are trained to help their clients research neighborhoods, get access to and qualify for bank loans, and find out about any government housing grants that are directed to Black homebuyers.

Rose, head of the 76-year-old NAREB, talked with the Amsterdam News about the vital role NAREB agents have played in helping Black clients navigate housing obstacles and access essential resources since the organization’s founding in 1947. NAREB was formed in response to the exclusion of Black real estate agents from the National Association of Realtors, which only began admitting them in 1961.

Rose explained that working with a real estate agent remains important for home buyers for several reasons: “Number one is experience. Even when you’re a first-time buyer, even when you’re a second- or third-time buyer, this is not what you do every day. The rules, the industry, the process changes day to day, year to year. So if you haven’t purchased a home –– or you did once but that was 10 years ago –– well, that process is different now than it was 10 years ago.

“Your ability to hire a professional that does this every day –– that’s in tune with the updated regulations, that’s in tune with the updated pricing and markets –– that’s important, particularly when it comes to the most expensive investment that most people ever make in their life. … I wouldn’t want to do this for the first time and not have experience on my side.

“Number two is negotiation skills. A lot of people don’t know everything that goes into negotiations and all of the things that keep being negotiated. We always think about price, but we don’t think about closing costs. We don’t think about repairs. We don’t think about other critical things that keep being negotiated. Without that experience, you as the buyer may not know about all the opportunities for negotiations that you have.

“The third thing is just speed and convenience. I don’t think real estate is rocket science; maybe a buyer could figure things out on their own, but there are certain things that you don’t do on a day-to-day basis. And that learning curve takes time, resources, and energy away from what your existing career is, from what you might be doing with your family, and other responsibilities that you have. One advantage of a real estate professional is having someone that’s focused on your file, while you as an individual have all the other things to focus on. It’s somebody’s job to help you get into that home and that’s a great benefit and a great resource to have on your side.”

The new real estate commission structures may deter some home sellers from publicly listing their properties. They might only want to advertise with brokerages that can bring in buyers who can afford to pay both the seller and buyer fees. This could, again, lead to fewer opportunities for Black home buying in the United States. These new real estate commission changes could have a significant impact on the Black wealth gap.

See Original Article at The Observer

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