News sensationalism at its finest… But major real estate industry changes are here!
As you may have heard, the National Association of Realtors® (NAR) has agreed to settle an antitrust case by paying $418 million in damages among enacting new policy changes that will impact how real estate commissions are paid. This legal action aims to address and potentially reform these practices to foster a more competitive and transparent real estate market.
Directly from the National Association of Realtors® (NAR) – This settlement would preserve the choices consumers have regarding real estate services and compensation. After the new rule goes into effect, listing brokers and sellers could continue to offer compensation for buyer broker services, but such offers could not be communicated via the MLS. The settlement expressly provides that sellers may communicate seller concessions —such as buyer closing costs— via the MLS provided that such concessions are not conditioned on the use of or payment to a buyer broker.
So what does this all mean? It means listing brokers and sellers can still offer compensation to buyer brokers, but this information won’t be shared through the MLS (to agents or the pubic). Sellers can use the MLS to disclose potential buyer incentives, like covering closing costs, provided these offers don’t require choosing a specific buyer broker or making payments to them. Buyer broker’s commissions can be negotiated to be paid from the seller, from their client (Buyer), or a portion of the listing broker’s compensation but it’s not apart of the listing anymore.
Unlike the media is wanting you to believe, compensation will continue to be negotiable and should always be negotiated between agents and the consumers they serve. Just like with any service industry, real estate professionals have their own offerings, rates, and ways of doing business.
I believe it’s beneficial for sellers to maintain the practice of compensating the buyer’s agent. This approach is effective in attracting a greater number of agents, who come with buyers ready and financially capable of making a purchase. In many industries this is common practice, where a seller offers compensation to individuals or entities that facilitate the introduction and successful close of a new customer.
…but why now?
The history of real estate commissions in the U.S. dates back to 1913, establishing a cooperative model where commissions were shared between the seller’s and buyer’s agents. This arrangement fostered a cooperative environment among agents, emphasizing collaboration over competition. The lawsuit is likely happening now due to a combination of increased scrutiny of traditional practices, evolution in technology and transparency, and growing awareness among consumers and regulators of potential anti-competitive practices. These factors with a heightened regulatory focus on ensuring competitive markets, may have contributed to the timing of the lawsuit.
I believe expert buyer/seller representation and agent collaboration remains and will undoubtedly continue to be among the most critical services a real estate professional can provide to their clients. For Buyers, finding the home is a very small part of what a skilled real estate professional should do for you. The “door opener” agents will be a thing of the past as experienced, well versed, data driven, and highly skilled negotiators will be in demand from discerning buyers demanding more from their agent.
It’s important to have your own representation when buying real estate. Working directly with the listing agent has its limitations and liabilities. The listing agent has a fiduciary responsibility to the Seller, committed to serving the seller’s best interests, aiming for the highest possible sale price. Without their own agent, buyers lack professional guidance for drafting and negotiating contracts, arranging inspections, managing repairs, dealing with appraisal issues, coordinating with all involved parties, and successfully reaching closing.
What does this mean for real estate professionals?
It’s time for Real Estate Professionals to STEP UP or find themselves out of the industry with some experts predicting up to a 35% fallout from the 1.5 million member Realtor® community. It will now be required to have a signed buyer-broker agreement prior to showing any homes for sale. It has been common practice for agents to show homes before signing an agreement with a Buyer, a way to get to know them first. Buyers deserve to know what business relationship they are getting into with you, expectations discussed, and what they can expect working with you. Because you are a true professional.
Sometime in mid-July is judgment day – Not all real estate professionals are the same, and the difference is about to be seen.
