American Finances 2020

A Challenge to Real Estate Commissions Gains Ground

Ann carrns

In a lawsuit, home sellers say that the current system is anticompetitive and that they overpaid. The Realtors association disagrees.

Consumer advocates have long criticized traditional real estate commissions as confusing and too high. Now, those commissions are coming under increasing legal pressure.A federal judge in Illinois ruled last week that a potential class-action lawsuit against the National Association of Realtors and four major brokerage companies could proceed.The lawsuit, filed last year in Federal District Court in Chicago on behalf of several home sellers, alleges that the way brokerages charge commissions and run property databases called “multiple listing services” is anticompetitive and artificially inflates commission rates paid to real estate brokers. (A similar lawsuit filed in Missouri is also pending, after a federal judge declined last year to dismiss it.)

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Where a Little Mortgage Goes a Long Way

ils.cash

Affordable homes can be hard to buy because lenders don’t make much money on small loans. But programs to encourage homeownership can help buyers build wealth.

The Shawnee neighborhood in Louisville, Ky., is a paradox: The houses are affordable, but they can be difficult to buy. The prices are so low that most banks and lenders will not bother writing mortgages for them. That was the problem facing Christopher T. Smith when he moved back to Shawnee, a historically Black neighborhood along the Ohio River, where his mother still lives in the house where he grew up. He and his wife, Gloria, did not expect to buy in an area where houses are more often scooped up by speculators who can pay in cash. “We were just looking to rent,” said Mr. Smith, who works as a hospital housekeeper and a part-time gardener.

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Interest Rates Are Low, but Loans Are Harder to Get. Here’s Why.

nav.com

Banks have tightened standards, becoming more choosy about their borrowers and asking a lot of questions.

As public school teachers, Tori Smith and her husband have careers that should survive the coronavirus economy, but their mortgage lender wasn’t taking any chances. It told them that they would have to put down more money to keep the interest rate they wanted, then dialed back what it was willing to lend them. And Ms. Smith said it had checked their employment status several times during the approval process — and again a few days before the couple closed on their home in Zebulon, N.C., last month. Ms. Smith said she had never gotten a straight answer about the new requirements, but she ventured a guess. “I felt like we had to bring more just because of Covid,” she said. The economic crisis caused by the pandemic has driven interest rates to rock-bottom levels, meaning there has hardly been a better time to borrow. But with tens of millions of people out of work and coronavirus infections surging in many parts of the country, qualifying for a loan — from mortgages to auto loans — has become more trying, even for well-positioned borrowers.

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