Last Friday, March 15th, The National Association of Realtors announced they had reached a proposed settlement for the commissions’ lawsuits. Let’s examine what happened and what it means versus what the media and social media tell you.
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It’s also worth noting that some agents are exacerbating the issue by plastering TikTok and YouTube with drama and speculation. Today’s podcast will help you navigate the wilds of real estate, armed with FACTs, not FICTION.
Let’s start with the fiction, courtesy of the major media, delivered promptly to your inboxes and social media:
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From the New York Times: “Powerful group agrees to slash commissions to settle lawsuits.”
CNN Wrote: “The 6% Commission on buying or selling a home is GONE after Realtors’ Association agrees to seismic settlement.”
MSNBC weighed in with this headline: “The NAR real estate settlement could make your next home more affordable.”
And CBS News: “National Association of Realtors to cut commissions to settle lawsuits.”
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Can you explain what’s wrong with these headlines? All four of them are wrong. Why? Let’s straighten out some Fact-based talking points for you, so your weekend conversations with prospects, clients, open house attendees, and media posts can be positive and productive.
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Facts About The Settlement:
Fact #1: The National Association of Realtors agreed to pay $418 million to the plaintiffs. The settlement allows for 4 years to pay the amount. Yes, NAR can afford this. No, this is not ‘cutting out of commissions’ as the headline implies.
Fact #2: NAR will prohibit offering/publishing buyer’s agent commission rates on the MLSs. This is big news because commissions were previously required to be listed, even if the amount was only $1. The change is supposed to take effect sometime in July. Just because commissions can’t be advertised in the MLS does not mean they are ‘going away’.
Fact #3: Sellers still have the option to pay all or some of the buyer’s side commission; it just has to be advertised, offered, and negotiated outside of the MLS. The headlines will have you believe that the commission is universally eliminated.
Fact #4: We’ve focused on this one this week because it affects you the most: Buyer’s Agents will be required to have a signed Buyer Representation Agreement before they can show their clients anything listed on the MLS. Before, it was highly recommended (and coached by us forever), but now it’s going to be a requirement.
Fact #5: You will no longer be required to be an MLS member to collect real estate commissions.
Fact #6: The settlement is not a ‘done deal’ just yet. It still has to be approved by the court and the DOJ. It may be amended, and there is still a lot of uncertainty surrounding the case, which we’ll discuss in a moment.
Questions we have / what to watch as we travel from this day toward July 1st when all of this is supposed to become official:
1. Will buyer’s agents ask for a seller’s concession to cover their commission on every offer? Will listing agents operate ‘business as usual’ and offer buyer-side commissions out of habit and tradition? Will they offer a higher buyer-side commission to sell listings faster?
2. Will agents have to call listing agents to find out what’s being offered and then prioritize those listings to show their clients? Isn’t this ‘steering’ and anti-agency?
3. Will agents invent code words to communicate what’s being offered? We’re already seeing language in new listings like ‘agent-friendly’. Does that mean you can count on being paid as a buyer’s agent without asking the listing agent?
4. How does Dual Agency work in this new world? Think about Open House leads. Unrepresented buyers may ask the listing agent to rep them. Does that become a sub-agency situation? Isn’t that what we got away from that created our current model?
5. Will there be flat-fee models to represent buyers, and if so, what amount will agents settle on? Maybe a sliding scale of fees depending on a) purchase price and/or b) services rendered.
6. How will the election play into this story? Aren’t we all supposed to create more affordable housing, not less affordable? Will there be special programs from the government entities, and/or mortgage lenders/
7. How much inventory will it take to eliminate all these issues and get back to the normal splits we’ve become accustomed to?
8. How will the builders react to these changes?
9. What happens to agents that don’t even know any of these changes are happening?
10. How do Zillow, Homes.com, CoStar, Realtor.com, and anyone else peddling leads change their models? What is a Zillow Flex agent to do?
11. Will mortgage lenders offer some of the services of buyer’s agents and become dual-licensed?
12. Will we see a consolidation of big brokers and a compression of independent brokers and teams?
