Fannie Mae & Freddie Mac Stand on Agent Comissions

Hi everybody, Joe Hillner with Your Home Sold Guaranteed Realty. Every week, I share market data to keep you informed with the local real estate market. Here is this week’s Boca Real Estate Market Watch.

Single Family Homes

This past week, we've seen:

• 70 new listings, ranging in price from $490K to $22.5M!
• 39 properties under contract.
• 29 properties pending.
• 63 homes sold, with prices ranging from $415K to $6.5M!

Condos and Townhomes

For condos and townhomes, the activity has been:

• 95 new listings, priced from $98K to $7.25M.
• 47 properties under contract.
• 33 properties pending.
• 71 closed sales, ranging from $90K to $7M.

Industry News: Fannie Mae and Freddie Mac's Announcement

In a significant development, Fannie Mae and Freddie Mac issued guidance regarding allowable interested-party contributions in light of the proposed Sitzer-Burnett verdict settlement agreement. This news is especially relevant following the NAR’s recent settlement of class action lawsuits, resulting in a $418 million payout and significant changes to real estate practices.

One of the most notable changes is that the MLS will soon be prohibited from offering a buyer's agent a commission. Sellers can still offer compensation to help sell the property, but realtors will not be allowed to promote or display it. This radical change has many agents concerned.

However, Fannie Mae and Freddie Mac provided some positive news for buyer's agents. They announced that they will not count buyer agent commissions as part of allowable interested party contributions (IPCs). This is crucial because when a buyer is getting a conventional loan, Fannie and Freddie limit the amount of seller-paid contributions that a buyer can receive.

Impact on Buyer Agent Commissions

It has been widely discussed that if buyers lack the funds to pay their agent, the commission could be negotiated into the deal, with the seller paying it as a credit. However, if the buyer is already receiving a closing cost credit from the seller, the additional amount could exceed the allowable limit, potentially jeopardizing the deal.

The government-sponsored enterprises (GSEs) clarified that this guidance is not an update to their selling guidelines but a clarification on the treatment of seller-paid real estate agent fees.

Freddie Mac stated, “Buyer agent fees have historically been fees customarily paid by the property seller or property seller’s real estate agent, and, as such, they are currently excluded from these financing concession limits. If these fees continue to be customarily paid by the property seller according to local convention, they will not be subject to financing concession limits.”

Fannie Mae similarly stated, “If a seller or seller’s real estate agent continues to pay the buyer’s real estate agent commission in accordance with local common and customary practices, these amounts are not required to be counted towards the IPC limits for the transaction.”

NAR and MBA's Involvement

After the settlement announcement in March, the NAR and the Mortgage Bankers Association of America (MBA) requested that the Federal Housing Finance Agency confirm its position on buyer agent compensation and IPC limits, calling it a “critical piece of the post-settlement puzzle.”

The clarification confirms that buyers whose agents are compensated by the seller will continue to have access to financing through the GSEs. Ken Fears, NAR’s director of conventional housing finance and valuation, stated, “So long as it remains ‘customary’ for the seller to pay commissions, those will not be added to the interested party contributions (IPC) and subject to the caps on IPCs.”

Conclusion

This news is particularly welcome for many first-time homebuyers who typically have limited funds to contribute to a transaction. As the market shifts towards a more balanced state, any potential decrease in interest rates this year could trigger a surge in buying activity. We'll be watching this very carefully.

That’s it for today. Thank you for watching, and stay tuned for more updates on the ever-evolving housing market. If you’d like specific market data on your neighborhood, just send me a text or give us a call at 954-799-6867. And if you’re watching this on my YouTube channel and like the information, don’t forget to hit the like and subscribe buttons and the notification bell below. Until next time, this is Joe Hillner with Your Home Sold Guaranteed Realty signing off for now. Go Serve Big everybody! Be nice to each other, and I'll see you next week!