The lawsuits against NAR( National Association of Realtors) and several brokerages who require their members to be part of NAR( mine included) were sued on allegations of anti trust laws by mandating that the sellers agent make an offer of payment to the buyers agent and setting rules that led to an industry wide standard commission. Basically the argument was NAR is forcing home sellers to pay an inflated commission that is then split between selling and buyers agent. Home sellers argued that inflated commissions are driving up home prices. I say the extreme lack of inventory is driving home prices, but what do I know?
Although most of us who are not in the market have little to no idea about this settlement, I have been asked a lot about what this means moving forward. The short answer is I am not quite sure( Nobody is). What I do know is that in mid July this industry is going to drastically change and here are some of my thoughts on what I THINK is going to happen and how it will impact everyone.
Let me first explain the settlement and some of the key factors. Nar has introduced some key practice changes.
1. Able to retain the right for consumers to continue to have cooperative compensation as an option as long as they pursue it off mls through negotiations. ( No more offering to pay a buyers agent on mls listings, but still able to provide that compensation on off mls deals. Off market properties)
2. Implications for members( myself) Buyers brokers can still be compensated in other ways.
A. Off market listings
B. fixed fee paid directly by the buyer
C. Concessions from the seller
D. Portion of listing brokers compensation( Off Mls)
Compensation would always and has always been negotiable and should be negotiated between agents and the consumers they serve. I have always negotiated commissions and will continue to do so.
3. New rule about written agreements.
A. Mls participants working with buyers must enter into a written representation agreement before a showing takes place. Most of you know how I feel about this, but it will now be a required practice.
The real losers of this lawsuit are buyers. Will buyers be willing to pay buyers agent out of pocket for their services? Many buyers will in turn go directly to the sellers agent which becomes dual agency( Who has YOUR best interest their?) The industry at a whole is also going to lose. Reports are as many as 1 million agents will leave the industry and the industry is set to lose billions of dollars in revenue( look at zillow stocks)
Sellers are also set to lose. This will not affect housing prices, Low inventory is driving the housing market. Sellers might end up still paying buyers agents through concessions, and exposure, is it really worth it now to have your home on the mls?
Let’s break it all down
Buyers:
Will buyers pay out of pocket? answer is unknown, but a recent survey says 90% will not. More likely is that a buyers agent commission will be part of the negotiation.
Will Sellers need to offer a buyers agent concession? Buyers may end up just going to the listing agent which would increase dual agency.
Sellers:
Commission compression will happen. Commissions will decrease. In several circumstances the seller will control the entire process because of no buyer representation and the number of buyers going directly to the listing agent.
Last of my thoughts, hundred of thousand of agents will leave the industry and it will become a “Professionals industry”. Levels of service will be negotiated with both buyers and sellers, and now more than ever it is time to show worth. This might not be a bad change, but it will be a change. Please bear with all of us as we go through this and learn more. As always I am available to discuss if you would like.
Scott Barrows
Keller Williams Realty
585-319-1272