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Dear Dave,

Wow, holy headlines!  Can you please give your insight into this new real estate lawsuit and if it’s really “The biggest shake up in real estate in the last 100 years.”  I’d love to get your thoughts on it!

Bob – Mack, CO

 At the end of last week’s column, the remaining questions pertained to this new lawsuit and forthcoming settlement making homes more “affordable” and who will be the big loser?

Will this make homes more affordable? The simple answer is NOT LIKELY, but there is one potential scenario (or a variation thereof) that might make homes more affordable.  First, let’s explore why it won’t…. this should be a pretty simple concept to grasp.  Typically, a home’s value is set by using other similar sold and under-contract properties to demonstrate what ready, willing and able buyers have been willing to pay for homes with similar characteristics.   Sometimes I do a market analysis that is fairly cut and dry, meaning many very similar homes have sold in the past 6 months that provide a good roadmap of what buyers (as a whole) are willing to pay for a home.  Now this is not an exact science, but more like reading tea leaves in many cases.  What’s the point, you ask?
The point to all of this is that a seller sets their price  based on what is the highest value they reasonably believe their home can be sold for based upon the comparison sales.   When that seller purchased that home it was generally not only a place where they lived, raised their family, made memories etc….but ALSO was a valuable investment and in many cases a large part of their wealth portfolio.  That being said, when was the last time you heard someone say, “I am willing to take a lower return on my investment if I don’t have to pay commissions on the sale of that investment.”  How about never?  I won’t say a seller will never do this, but I will say I have not met one in my 22-year career.  Isn’t that part of the point of an “investment”… make as much money as possible and do it ethically?  So, we can connect the dots and conclude that most sellers will still want top dollar when they sell their home and any commission savings will improve the return on their investment.  Especially considering low inflation, taxes on the decline, the cost of living going down, cheap gas etc……Ok, all kidding aside, but maybe you see my point.  With the cost of EVERYTHING going up, who in their right mind would say, “Let’s just sell it for less”?  Nobody.  

But for home buyers, it’s another story.  Remember the headlines have emphatically said this will make it “more affordable” to make that homeownership dream come true.  Assuming that my above theory has merit, if you are a buyer, you will still pay the same for the house of your dreams, unless you find that needle-in-the-haystack seller who wants to pay it forward, and will ask less since they don’t have to pay as much / any commissions to your buyer’s agent. (wink, wink) So instead of having the seller contribute to your agent commissions and have those commissions rolled into the purchase, as has been done for years, a buyer will now have to potentially pay their agent commissions out of their own pocket. This will be ON TOP of or IN ADDITION to the price of their new dream home.  Does that sound more affordable for a buyer?  No. Because it’s not and that’s the sad point in all of this.   Just because the media, and the powers that be, say it’s true does not mean it’s true…..many times it’s much the opposite.   I am not the sharpest knife in the drawer, but hopefully, this makes as much sense to you as it does to me.  

I am sure there will be those who disagree with me and I welcome different perspectives/opinions…..time will tell the true outcome.  As I close this column I will say that there is one scenario I can think of that might lead to better home affordability, but be careful what you ask for….. We will call next week’s column “Unintended or Intended Consequences?……You Decide”.  See you next week.

Dave Kimbrough
The Kimbrough Team



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