The recent $1.8 billion verdict against the National Association of Realtors (NAR) and two brokerage firms for collusion in keeping commissions artificially high is still causing aftershocks. However, for industry veteran Matt VanFossen, the case is simple math. He explained that the average buyer agent commission is 2% to 3%, which means that buyers have to bring $15,000 cash to the table to pay for their agent’s services. VanFossen believes that this practice is unfair to consumers who cannot afford it. As the vice president of Community Home Lenders of America (CHLA), he advocates for fair treatment of the industry and consumers.
VanFossen’s interest in the case extended beyond his role as CEO of Absolute Home Mortgage Corp. and Mortgage Automation Technologies. As a stakeholder in the industry, he expressed a particular concern for first-time homebuyers, who were heavily impacted by the successful litigation against NAR, HomeServices of America, and Keller Williams. While ReMax and Anywhere Real Estate initially faced legal action, they opted to settle out of court for a combined sum of $140 million. This focus on first-time homebuyers placed them at the forefront of the case.
VanFossen stated that he has been engaged in this profession for two decades, focusing primarily on assisting first-time homebuyers. When he started as a loan officer at the age of 20, he found that only first-time buyers were willing to communicate with him. During that time in 2005, he had access to an abundant supply of subprime loans specifically designed for first-time buyers, offering 100% financing.
However, VanFossen acknowledged that times have changed significantly since then. Presently, when working with a first-time buyer, particularly from the Gen Z generation, they often perceive housing as unattainable due to high prices and find it challenging to save money. Consequently, these buyers require assistance in leveraging options such as low-down-payment FHA loans, 100% financing through VA loans, or financing closing costs through seller concessions. It is not that they do not recognize the value of having a buyer’s agent; rather, they simply cannot afford it. For instance, adding an additional $7,000 in closing costs to a $250,000 house, regardless of whether it is financed or not, becomes financially burdensome.
The main issue lies in affordability, or the lack thereof. VanFossen emphasized that this poses a challenge to the buyer agent structure, as some consumers, despite recognizing its value, are unable to afford the buyer agent fee.
According to a statement given to MPA, NAR representative Wes Shaw stated that the commission level is determined by the market. He explained that compensation rates are decided by the market and are negotiable. The cost of broker commissions is determined by factors such as service quality, customer preference, and market conditions. Real estate commissions have historically fluctuated due to market conditions, and commission rates are currently lower than they were in the 1990s, despite an increase in the value of real estate agents. The case may have been defined by the lack of affordability, whether it was due to the commission or the invisible hand of commerce.