A landmark legal settlement between home sellers and the real estate industry could cause a shift in the way homes are bought and sold, beginning this summer.
There is ALOT of misunderstanding about this issue and I will try to clear a few things up for you but do not fear, you will still be able to sell your house with an agent going forward.
The agreement could mean that home buyers would set their own agents’ pay, and sellers might save on commissions.
What happened?
The National Association of Realtors announced Friday that it had agreed to pay $418 million to settle more than a dozen antitrust lawsuits that accused NAR of imposing rules that inflated real estate commissions. NAR admitted to no wrongdoing, according to the news release.
(In fact, commissions have always been negotiable on both sides of the table. None of the settlement money will ever reach any plaintiffs.)
What the lawsuits are about:
The settlement stems from a federal class-action antitrust lawsuit, Burnett v. National Association of Realtors et al., filed in Kansas City, Missouri. Last October, a jury sided with the plaintiffs, agreeing that NAR and large brokerages conspired to inflate commissions paid by sellers.
(This is completely unfounded and a manipulation by the attorney’s who convinced the jury there was “price-fixing.” Many Brokerages have always offered flexible commissions as well as flat fee options among other options. It’s only that so much time has now passed that it’s been commonplace for seller’s to compensate across the board about 4 – 6% of a selling price. It was never “fixed” it was simply common.)
It’s one of more than 20 similar cases filed in federal courts nationwide, not all of them involving NAR, and the only one that went to trial all the way to a verdict. NAR said the proposed settlement in the Burnett case would resolve all of the lawsuits against the association, and will go into effect in mid-July if the court approves it.
NAR is a trade association with more than 1.5 million members working in the real estate industry. The association said the revised rules would affect anyone who uses a multiple listing service — a database of properties for sale in a geographic area — regardless of whether they are licensed Realtors, which is the designation for real estate agents who are members of NAR.
The lawsuits challenge NAR’s cooperative compensation rule, which requires seller’s agents to make “blanket unilateral offers of compensation” to buyer’s agents. To list a home on an MLS, the seller must make this “blanket unilateral” offer to pay buyer’s agents, who influence which houses their clients consider.
(There will still be an active MLS but the rule states that any buyer representation payment will not be listed. There is talk of an alternative resource created to double check who is paying for who’s services and at what rate or, it will be negotiated ahead of time when the buying/selling process is initiated.)
Would set their agents’ pay?
With the elimination of cooperative compensation, sellers would not be able to indicate within the MLS how much they are willing to pay a buyer representative.
However, the reality is, most sellers will continue to pay buyer’s compensation to their agents as often times, the buyers do not have the means to do so. Regardless of the amount the sellers will still want to be in a position to negotiate with as many buyers as possible – not only the ones who “might” be able to pay their agent to work on their behalf.
What it means for buyers and sellers this spring:
Sometime between now and when the settlement goes into effect in July, buyer’s agents might start asking buyers to sign contracts that spell out how much the agents will be paid (if there will or will not be a balance due to the agent depending on how much of a payout any seller is willing to provide) and at what point in the process. Over the same period, home sellers should consult their listing agents to make sure they’re complying with the new rules. This settlement would likely apply to real estate agents whether or not they are members of NAR.
As nothing is official until July of 2024, it’s business as usual. There will be modifications and structure changes for all of us as agents and how the public interacts with everyone associated with a transaction (home sale and purchase alike.) The rules that the banking industry will also be changing to flex with the new rules.
I invite you to reach out to me at any point to learn a little more about how this scenario may directly impact you and your home sale and certainly how it may affect the house hunting process. In my opinion, there will be slight format changes, a little change to the paperwork but overall, not much change in the reality of how traditional buying and selling has taken place in the USA for many decades. It’s always my honor to be your trusted guide and resource for all things pertaining to Real Estate. Thank you!
-Christy Crouse
