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For consumers not following real estate events, there are a couple of class action lawsuits going on right now regarding commissions.
The first trial was the Sitzer trial. Closing arguments ended yesterday and in three hours of deliberation today, the jury found for the plaintiffs (the sellers) against NAR, Keller Williams, and Berkshire Hathaway and awarded 1.8 billion in damages. There will be appeals, of course.
RE/Max and Anywhere (Coldwell Banker, ERA, etc), settled earlier instead of going to trial.
There is another class action lawsuit Moehrl vs. NAR that is still slated for trial, but for those of you looking to buy or sell in the future, things will likely be changing on commissions.
Buyers need to know that it is likely that buyer agent fees will likely be negotiated directly with your buyer agent. So when you go to pick your buyer agent, I strongly encourage you to shop around and find a good agent or if you do hire a rookie, negotiate their fee because you will likely be paying it directly on your closing statement. I think during this slow period buyer agent fees will stay competitive, but when the market picks up again, I can see buyer agent fees coming way down.
Read any buyer agency agreements and don't lock yourself into long-term contracts. Only some states require buyer agency agreements, and the rest will likely be following suit here soon. I know it is coming in Oregon and agents won't be able to show you a house unless they have you under contract as a client. Keep that in mind if they tell you they need an agreement to show you a home. It is coming in the next few years.
I don't know how it would be possible to enforce a payment from a buyer at closing without a well-drafted detailed agency agreement, aka "contract for services."
And, if buyers have to pay a negotiated fee, costs will only go up, including total purchase costs, unless appraisers adjust valuations for buyers' agent fees not being baked into the contract price.
Outlawing all dual agency might help stabilize fees.
I don't know how it would be possible to enforce a payment from a buyer at closing without a well-drafted detailed agency agreement, aka "contract for services."
And, if buyers have to pay a negotiated fee, costs will only go up, including total purchase costs, unless appraisers adjust valuations for buyers' agent fees not being baked into the contract price.
Outlawing all dual agency might help stabilize fees.
What Fun!
I was thinking about appraisers. In the past, they have done nothing for unrepresented buyers writing offers on my listings when there is no BAC included. They don't take it into account even though they have to note other closing costs on the appraisal. I imagine that will have to change as some homes will have a BAC payout and others won't.
It is going to get interesting for sure. You retired just in time!
I am glad that I am not a realtor any longer. I am only an average citizen in a chair in front of my computer on internet sites like this one. I don't know if this recent class action suit was necessary or justified. I am not an attorney and I don't play one on TV.
I could be wrong, but I think most RE Pros on this site could flirt with retirement in the next decade, or however long this will take to untangle. I fully expect this to find its way to the Supreme Court.
Not certain how many recall that Dodd/Frank seriously revamped how the mortgage world is paid. For me it was a God-send, I didn't know how to say no to cut my commission and I didn't charge overages. So Dodd/Frank gave me a pay raise. Lenders everywhere had to up their payouts, well below the minimum or lose their sales force. But the one thing that is truly different is lenders could play the market (they were not supposed to, but they did). I can remember working with loan officers at a bank losing 15K on one loan they didn't lock in, but their buyers had a lock letter. And I can remember the reverse, a loan officer winning a prize for having the highest overages in the company.
Anyway, in the spirit of Dodd/Frank, I'm feeling some legislation is coming (maybe not soon) that will impact RE sales commission. These cases may be interesting reading.
It just means buyers have to come up with more money at closing.
Sellers will pay less of the sale's price to their agent but may see less activity as buyer agents wont show until they have contracts for the buyer to pay them their commission.
The lawsuit sounds like some win, but in the end, it just screwed things up unnecessarily.
It just means buyers have to come up with more money at closing.
Sellers will pay less of the sale's price to their agent but may see less activity as buyer agents wont show until they have contracts for the buyer to pay them their commission.
The lawsuit sounds like some win, but in the end, it just screwed things up unnecessarily.
I can see why you say that, but I do think that most sellers will offer some sort of compensation to a buyer agent to entice them to bring them a buyer. It just won't be unconditional in the future so it will be up for negotiation with low offers.
I was recently in a discussion where polling was done on this topic and 54% of buyers said they would not pay their buyer agent directly. They would rather represent themselves. This is happening right now on one of my listings. The buyer is unrepresented because they want the BAC credited to them. We will see more unrepresented buyers in the future.
This should also drive the number of agents down which is very, very necessary.
NAR Letter:
I have an important litigation update. After an 11-day trial in the case of Burnett v. NAR et al, the eight-person jury in a Kansas City, Mo., federal courtroom, came back Tuesday and found the National Association of REALTORS® and other corporate defendants liable in the case.
This matter is not close to being final. We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition. We remain optimistic we will ultimately prevail. In the interim, we will ask the court to reduce the damages awarded by the jury.
In court, NAR presented evidence that consumers are better off and business competition is able to thrive because of our rules and how well local MLS broker marketplaces function. In fact, the NAR cooperative compensation rule for local MLS broker marketplaces ensures efficient, transparent and equitable marketplaces where sellers can sell their home for more and have their home seen by more buyers while buyers have more choices of homes and can afford representation. NAR also presented that REALTORS® are everyday working Americans who are experts at helping consumers navigate the complexities of home purchases and advocates for fair housing and wealth building for all.
NAR was formed 100 years ago because there was a need for a higher level of ethical practice. We should all be proud that REALTORS® continue to serve in that role. I know our mission to advocate for homeownership and always put our clients’ interests first is unwavering. We recognize our legal team and outside counsel have worked tirelessly on this case. It will likely be several years before we reach a conclusion.
I am grateful to our NAR staff and our 1.5 million members who work to serve their clients every day. We have an important shared purpose for consumers, and we could not achieve that without all that each of us does.
Below are some key questions people may have. We will continue to keep you informed of any notable litigation milestones, and in the meantime, I encourage you to continue to refer to the Competition.Realtor website, which provides a comprehensive overview of—and many resources for explaining— how REALTORS® and local MLS broker marketplaces benefit consumers. The need for each of us and every member to continue to express our value every day in as many ways as we can remains an imperative.
Tracy Kasper
NAR President
Last edited by MikeJaquish; 10-31-2023 at 02:00 PM..
I could be wrong, but I think most RE Pros on this site could flirt with retirement in the next decade, or however long this will take to untangle. I fully expect this to find its way to the Supreme Court.
Not certain how many recall that Dodd/Frank seriously revamped how the mortgage world is paid. For me it was a God-send, I didn't know how to say no to cut my commission and I didn't charge overages. So Dodd/Frank gave me a pay raise. Lenders everywhere had to up their payouts, well below the minimum or lose their sales force. But the one thing that is truly different is lenders could play the market (they were not supposed to, but they did). I can remember working with loan officers at a bank losing 15K on one loan they didn't lock in, but their buyers had a lock letter. And I can remember the reverse, a loan officer winning a prize for having the highest overages in the company.
Anyway, in the spirit of Dodd/Frank, I'm feeling some legislation is coming (maybe not soon) that will impact RE sales commission. These cases may be interesting reading.
I fully plan to retire well before the next decade ends. I think there will be legislation soon as well especially regarding VA loans and removing BAC from non-allowable closing costs and maybe an increase in allowed seller paid closing costs to allow BAC to get folded into a loan.
Mike, did you see that they just filed a new national lawsuit? The brokerages named in the new suit are Compass, eXp, Redfin, Howard Hanna Real Estate, United Real Estate, Douglas Elliman and Weichert Realtors.
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