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March 18, 2024
Enrollment Spikes in California’s Home Insurer of Last Resort, Raising Concerns Over Its Sustainability
March 18, 2024
Treasury Is Asked Why U.S. Firm Insures Ships Carrying Iran Oil
March 18, 2024
Marsh McLennan Agency Expects Stable Commercial Property Reinsurance Market in 2024
March 18, 2024
Apple to Pay $490M to Settle Allegations Over Misleading Investors
March 18, 2024
Inside the New Agency Commission System of Buying and Selling a Home
Some buyers pay their agents directly through a flat fee or an hourly rate, instead of relying on the seller to set a rate. Some sellers offer a lower commission to a buyer’s agent than the currently typical 2% to 3%.
Customers like the flexibility of these new models, which can significantly lower the fees paid to a buyer’s agent. The savings can run to several thousand dollars on a home listed at $400,000.
But these nontraditional approaches often mean buyers have to do more work themselves. And sellers who offer lower commissions could find it tougher to sell if buyers’ agents discourage buyers from bidding on their homes.
Regardless, these models look poised to become widespread this summer when the new rules go into effect and buyers and sellers become aware of the changes, according to analysts.
In a $418 million agreement announced Friday, NAR settled legal claims that the industry conspired to keep agent commissions high. In doing so, the organization agreed to make it easier for home buyers to negotiate fees with their own agents.Starting in July, most home sellers won’t need to make an upfront offer for how much they will pay a home buyer’s agent. That means if home sellers won’t cover the cost of the buyer’s agent, buyers could have to pay their agents out of pocket.
Home shoppers paying directly for each task an agent performs could save buyers $30 billion a year compared with under the current system, because buyers would negotiate for lower prices and tour fewer homes, according to a working paper released by economists at the Federal Reserve Bank of Richmond.
Thanks to online listing sites, it is easier today for buyers to find homes and cheaper for sellers to advertise their listings, said Mike Maher, chief executive officer of Newfound, which owns discount brokerages.
“There’s a lot of excess fat in the costs to sell a home,” he said. “If you remove some of those costs, it should make homes more affordable and attainable.”
The hope for buyers is that new payment models help lower their commission costs, which could ultimately reduce home prices.
Flat fees for service
One way that might work is a flat-fee model. Under this approach, buyers would agree to pay their agents directly, but they could choose to ask the seller to cover this cost.
Fred Glick, founder of the Los Angeles brokerage Arrivva, represents buyers for a flat fee of $9,750. If sellers offer a higher compensation to the buyer’s agent, Glick rebates the difference to the buyer. For sellers, Glick charges a flat fee of $15,750.
In exchange for those savings, buyers take on some duties often performed by an agent. Glick’s buyers typically find homes for sale on their own. “Every once in a while we get someone who needs the hand-holding, and we tell them, unfortunately, we can’t help them,” he said.William and Ashley Brode worked with Arrivva to help sell their Los Angeles home and buy a different one earlier this year. Brode said he appreciated Arrivva’s advice on negotiating and that they didn’t need help searching for a home.
“In this area, houses are very expensive, so a flat fee versus a percentage can make a massive difference,” Brode said.
The digital real-estate brokerage Beycome in South Miami, Fla., typically offers buyers a rebate of two-thirds of the buyer’s agent commission.
Buyers can schedule showings, submit offers and close a deal online. For most of the process, buyers essentially become their own agents and receive an information packet to answer questions. Beycome pays local real-estate agents to open the door for home showings.
Since buyers do a lot of their own home-buying research online these days, commissions should be lower, said Beycome’s co-founder Nico Jodin.
Sellers paying less
DeLeon Realty in Palo Alto, Calif., began advertising in January that sellers could list their homes for a total commission of 3.5% or less, which would include 3% for the listing agent. That compares with the 5% to 6% typical commission nationwide, which is split between the seller’s agent and the buyer’s agent.
Many of its sellers were able to save money by offering lower commissions to buyers’ agents than what was typical in Silicon Valley, said Chief Executive Michael Repka. Of 20 sellers who used the firm in January and February, nine chose to offer the buyer’s agent $10,000. Another chose $20,000. The other 10 offered compensation ranging from 0.5% to 2.5% of the sale price. Despite the discounted commission rates, Repka said, demand for the listings was strong. One Palo Alto home that listed at just under $2 million and offered a $10,000 buyer’s commission got 17 offers, he said. The home sold for $2.7 million. That means if the seller paid a more typical 2.5% commission to the buyer’s agent, the fee would have come to about $67,500.“If we had buyers’ agents being paid by buyers, I think buyers would be well-served, because they would put more thought into which agent they want to work with,” Repka said.
Some buyers want service
Yet failed previous efforts to disrupt the traditional structure suggest that many buyers expect a high level of service. Seattle-based Redfin used to charge buyers $250 a tour and rebate two-thirds of the buyer’s agent commission, assuming that buyers would opt to tour homes themselves to save money.
But buyers wanted more advice from their agents, and listing agents were skeptical that buyers were serious if their agents didn’t join them on tours, said Chief Executive Glenn Kelman. Redfin changed its model in 2008 to offer unlimited free tours and a 50% rebate.
“I’ve now become convinced, through bitter experience, that people need someone to talk to before they make an offer,” Kelman said. Still, he added, commission costs should be lower.
“People will pay for service,” he said. “They just shouldn’t overpay for it.”
March 18, 2024
Allianz Launches In-House Financial Lines Claims Team
March 15, 2024
Realtors Reach Settlement that Will Change How Americans Buy and Sell Homes
The $418 million agreement will make it easier for home buyers to negotiate fees with their own agents and could lead more buyers to forgo using agents altogether, which has the potential to drive down commission rates and force hundreds of thousands of agents out of the industry.
NAR agreed to abandon longstanding industry rules that have required most home-sale listings to include an upfront offer telling buyers’ agents how much they will get paid. Under a system in place for a generation, sellers have typically set buyers’ agents fees. Consumer advocates say the arrangement has prevented buyers from negotiating to save money and kept commissions in the U.S. higher than in most of the world.
NAR has said the current model helps buyers benefit from an agent’s advice even if they can’t afford to pay an agent out of pocket.
If the settlement is approved by a federal court, listings of homes for sale in most parts of the country would no longer include upfront offers to buyers’ agents starting in mid-July, and buyers would be able to negotiate compensation upfront with their agents.
Buyers are likely to be more price conscious when selecting an agent and might opt to save money by not using an agent at all, or by paying their agent a smaller fee in exchange for limited services. For example, a buyer could pay an agent to put together an offer and review an inspection report, but not to accompany the buyer on home tours.The agreement is the answer to months of uncertainty and mounting legal threats to the residential real-estate industry. NAR, one of the nation’s most powerful trade groups, has been facing crippling antitrust liability since a Kansas City, Mo., jury delivered a $1.8 billion verdict against the organization and two national brokerages in October. The jury found that industry rules for how buyers’ agents are paid were keeping commission rates artificially high.
The settlement will resolve wide-ranging legal exposure for the industry, which has been facing a series of antitrust lawsuits similar to the Kansas City case. Separate litigation in Chicago, which appeared headed for trial later this year, could have threatened a damages award of more than $40 billion. State and local Realtor associations, some brokerage firms and Realtor-owned multiple-listing services are covered by the agreement.
March 15, 2024
State Farm Announces New Leadership
March 15, 2024
Commissioner Lara Announces Next Phase of Sustainable Insurance Strategy to Safeguard Californians’ Access to Insurance
- More reliable rates: Insurance consumers will have more stable costs than under current regulations, which have resulted in sudden and steep increases for those at higher risk of wildfire.
- Greater availability of insurance: Insurance companies will increase their writing because they can better anticipate future losses, rather than making abrupt decisions to non-renew higher-risk policyholders, pause writing, or rapidly increase rates.
- Stronger oversight: The Department of Insurance will have strong public oversight of modeling, which is already being widely used by insurance companies outside of rate-making and across the nation. The Department will have access to models and build expertise, so California can continue to lead on consumer protection.
- Safer communities: Catastrophe models can capture efforts taken by federal, state, and local governments, property owners, communities and utility companies to mitigate the exposure of communities to catastrophic events – encouraging and rewarding those efforts.
March 15, 2024
Bayer Weighs ‘Texas Two-Step’ Bankruptcy Filing Over Roundup
March 15, 2024
Why Are Data Breaches Still Rising Amid Increased Cybersecurity?
The number of reported data breaches in the U.S. rose to a record 3,205 in 2023, up 78% from 2022 and 72% from the previous high-water mark in 2021, according to the nonprofit Identity Theft Resource Center. Trends are similar in other parts of the world.
What can explain these two seemingly contradictory statistics? If awareness of and spending on cybersecurity is growing, why do data thieves remain undeterred?
Based on our research, three things are helping to drive the current increases:
Evolving ransomware attacks: In traditional ransomware attacks, which I call Ransomware 1.0, hackers break into a company’s computer system, “lock up” data by scrambling it and demand a ransom payment in return for the decryption key. To resume business, companies typically have a choice: Pay the ransom or try to re-create the data that has been frozen. In these attacks, data isn’t stolen, so there is no data breach to report.
Ransomware attacks have evolved, however, in two key ways.
First, after a slight drop, these kinds of attacks are on the rise again due to the emergence of ransomware gangs that franchise their malware and make it available to budding cybercriminals. This trend is allowing more criminals, even those with minimal computer knowledge, to get into the ransomware game.
Second, these attacks are becoming more damaging in that many attackers are now stealing their victims’ data, in addition to just locking it up. I refer to this new approach as Ransomware 2.0. The hackers threaten to disclose the private information if they don’t receive a ransom payment. This results in large leaks of corporate and consumer data that didn’t occur before.Cloud misconfiguration: More companies now store and maintain their corporate data in the cloud via services such as Amazon Web Services, Google Cloud and Microsoft Azure to avoid the expense of having to own and operate their own data centers. This is making the cloud an attractive target for hackers. In fact, 82% of breaches in 2023 involved data stored in the cloud, according to a recent report.
Cybercriminals are taking advantage of the fact that many organizations migrated rapidly to the cloud without fully understanding all of the configuration settings and establishing procedures to keep their data safe. As a result, errors and glitches in these settings are common, and many companies have no idea that their sensitive information is exposed to the public internet until it is too late. Such misconfigurations have become one of the most common security issues when deploying new cloud-based applications.
Exploitation of vendor systems: Almost every company, especially large companies, rely on a network of vendors to provide services ranging from maintaining the air conditioning to updating software packages. These vendors often have special access to the company’s computers, which I refer to as “side doors,” similar to a passkey given to the cleaning crew.
As large companies have become better prepared to repel cyberattacks, hackers have shifted their attention to vendors, often much smaller companies with limited cyber defense resources and expertise. Attackers exploit those weaknesses to first get into the vendor’s system, then use the vendor’s privileged access to get into the computer systems of every company that uses the vendor.
A vulnerability in a single vendor system can threaten thousands of organizations. Security experts say more than 2,600 organizations around the world were victims of the recent MoveIt attack, in which hackers exploited a vulnerability in a common file-transfer tool to gain access to personal data. Research by cybersecurity-ratings provider SecurityScorecard, meanwhile, found that 98% of organizations globally have a relationship with a vendor that has had a data breach in recent years.
In many cases, companies fall victim to these attacks because they aren’t aware of the risks that they are taking, such as not confirming the quality of a vendor’s security or monitoring whether their outgoing data traffic is being transferred to improper destinations. Organizations can, and must, do these things better to stop the continued rise in data breaches.
March 15, 2024