Two different “bombshell” lawsuits that focus on agent compensation will likely not stand up in court, according to Bernice Ross. BUT, also according to Ross, the issues of cooperative sharing of listing information and compensation via the MLS need proactive attention.
Class Action Certification is Procedural, Not Operational
A few weeks ago, we posted an article here about the class action certification of the Sitzer/Burnett vs. NAR (National Association of REALTORS®) case. This certification process was only procedural – it did NOT have anything at all to do with the merits of the plaintiffs’ (Sitzer/Burnett) case.
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To refresh your memory of the plaintiffs’ position, “Plaintiffs allege the enforcement of the Challenged Rules (that require sellers to make a blanket unilateral offer of compensation to any broker representing potential buyers as a condition of listing their home on a Subject MLS”) results in price-fixing and inflated residential real estate broker commissions paid by home sellers.
For the plaintiffs to be successful in their case, the plaintiffs would have to prove that sellers do not compensate a buyer’s broker when, in fact, sellers do compensate buyer’s brokers.
Sellers DO Compensate Buyer’s Brokers
Bernice Ross, the president and CEO of Brokerage UP and RealEstateCoach.com and writer for Inman, offered three examples of sellers compensating buyer’s brokers:
- Builders do and have for years paid commissions to buyer’s agents whether or not they’ve listed their for-sale properties with an agent.
- Many FSBOs often compensate buyer’s agents who bring them offers on their for-sale properties
- Sellers may pay buyer’s agents monetary commissions, trips, televisions, etc.
Ross Believes Both Lawsuits “Misstate Facts” & Are “Ill-Informed”
In prior writing about former, quite similar cases, Ross points out various discrepancies in the current plaintiff lawsuits:
- Listing agents’ commission rates are transparent – rates appear on “every listing agreement and on every offer.”
- Local, state and federal legislation and regulations govern price-fixing and commission in the real estate industry rather than NAR’s Code of Ethics and NAR’s Handbook on Multiple Listing Policy.
- The Exclusive Right to Sell is a binding contract between the seller and listing agent – it is a matter of contract law and not something that can be changed by a buyer’s agent.
- Compared with international broker marketplaces, the US MLS system provides guidelines for accuracy of housing inventory, pricing, commission structures at comparable or lower total costs than in other countries. With Exclusive Listings and no MLS (as in Germany, the UK, Australia, New Zealand, etc.) listings are more than likely to be marketed in the brokerage firm’s storefront that does not provide listing information to all interested buyers and sellers.
Moss Recommends Pro-Active Alternatives for Buy-Side Commissions
- Buyers could negotiate with their agent what the buyer’s agent compensation will be. That compensation would be built into the transaction’s closing.
- Consistent with NAR and industry guidelines and practices, the buyer’s compensation published in the MLS ought to be disclosed in writing prior to the buyer making an offer on the listing.
- Buyers and buyer’s agents may agree to share the buyer’s portion of the commission in a separate contract either when they have a specific agency relationship or when an offer is written (and written into the offer). The specifics of who gets how much must be spelled out.
- Any commission amounts credited by the buyer’s agent to the buyer (such as repairs, rebates, referral fees, etc.) must be disclosed to the lender in writing.
- Utilize blockchain and “smart contracts.” According to Ross, blockchain is a pathway “that allows buyers to negotiate with their buyer’s agent regarding commissions” and avoids interference into the contract by the sellers and/or listing agents.
Bernice Ross is NOT an attorney and makes no claims to be. The views summarized here are Ross’s alone, not Tim and Julie Real Estate Coaching, nor the author of this summary.
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Thanks to Bernice Ross writing for Inman.