August 2024 Market Roundup

Monthy Real Estate Newsletter for Salmon, ID and surrounding area of Lemhi County.

Real Estate Practice Changes: What You Need to Know

As of August 17th, 2024, all Realtors across the nation will need to adhere to new practices following recent updates in response to the National Association of Realtor’s (NAR) settlement. A significant change is the mandatory requirement for buyers and their agents to sign two critical documents before even stepping inside a home for a showing. This new procedure aims to ensure that all parties are fully informed and in agreement about the terms of their relationship and the compensation structure involved.

The first document is the Idaho Agency Disclosure Brochure, which outlines the different types of agency representation and explains the difference between being a customer and a client. This document has long been a staple in real estate transactions, helping to clarify the roles and expectations of each party involved.

The second required document can vary depending on the nature of the agreement between the buyer and the agent. The newly introduced RE-5 Prior to Touring Agreement is an introductory form that discusses whether the agent will charge the buyer for showing homes. While it is anticipated that most agents will continue to charge $0 for showings, this form serves as an important prelude to more in-depth discussions about agent compensation. The RE-14 Buyer Representation Agreement establishes a client relationship, while the RE-15 Compensation Agreement with Buyer maintains a customer relationship. Both the RE-14 and RE-15 have been in use for many years, but the RE-5 is a brand-new addition, designed to bring transparency and clarity to the compensation process right from the start before you can even walk into a home.

These changes are being driven by the NAR to ensure that buyers are fully aware of potential costs and fees associated with purchasing a home. Although agent compensation has always been negotiable, the practice of sellers covering both their own and the buyer’s agent’s fees has generally been the norm. This may continue (it depends on the seller), but there may also be times when sellers choose not to compensate the buyer’s agent. If a seller chooses not to compensate the buyers agent from the proceeds of the sale, it then becomes the buyers responsibility to compensate their agent. This new requirement for upfront discussions about compensation is crucial, as it allows buyers to budget appropriately and avoid surprises down the line.

For sellers, this change presents a new consideration: should you offer to pay the buyer’s agent’s compensation? While it is ultimately the seller’s decision, there are some risks to consider if you choose not to. Not all buyers are in a position to compensate their realtor fairly, particularly in the months following a home purchase when finances can be tight. Some buyers will shy away from properties where they must cover their agent’s fees, either due to financial constraints or a lack of understanding about the benefits of buyer representation. By offering agent compensation, sellers may gain a competitive edge, potentially leading to a quicker sale at a higher price.

The financial realities of today’s market cannot be ignored. With recent research indicating that approximately 63% of Gen Z, Millennials, and Gen X (18-45 years old) have less than $10,000 in savings, the burden of covering a down payment, closing costs, and now potentially their agent’s real estate fees could be overwhelming. Sellers who choose not to offer agent compensation may find themselves limiting their pool of potential buyers to those who can only afford to take on these additional costs. In a market where every advantage counts, the decision to cover agent compensation could be the key to a successful sale.

Local Market News

In Salmon, ID, and the surrounding areas of Lemhi County, the first half of July was unusually slow, but the pace picked up toward the end of the month with several properties going under contract, which continued into August. Currently, our average time on market is sitting at 98 days before securing a buyer, which aligns with the national average but is a bit longer than we’re used to seeing this time of year (when looking at the summer selling season). However, this doesn’t concern me; it’s a sign of a balancing market where buyers and sellers are on more equal footing. Notably, we’ve seen four properties over one million dollars hit the market in the last 30 days, with three of them listed in just the past five days.

Earlier this week, the stock market took a dive, and interest rates briefly followed, only to climb back up to 6.9% for Conventional loans and 6.0% for Rural Development loans. With a bit of assistance from a seller, buyers could potentially secure an interest rate in the 6.5-5.5% range, which is a significant improvement after rates hovered in the 7s for so long. I have heard from multiple sources in the lending industry that interest rates are expected to continue to fall as we get closer to November.