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The way Realtors are paid may change if courts uphold an agreement the National Association of Realtors made March 15 to pay $418 million in damages to settle lawsuits.
Homeowners said in a class action lawsuit against the real estate trade group that its rules forced them to pay large fees, according to The New York Times.
Rory Dubin, president of the Northeast Florida Association of Realtors, said the industry is waiting on a federal court ruling.
“It’s not guaranteed that it will be accepted, but it probably will the way it looks,” he said.
If accepted, rules are expected to change in July.
At the heart of the matter are Realtor commissions.
Dubin said that if passed, brokers representing buyers will no longer be allowed to post their commission on the Multiple Listing Service, or MLS, which lists available homes for sale in a region.
Brokers representing buyers have used the information to help determine which homes to show prospective buyers. Most often, the selling broker splits the commission with the buyer’s broker.
Those commission fees are usually paid by the seller. The commissions are added to the sale price of the home when it is listed.
With court approval coming in July, buyers and sellers will have more ability to negotiate fees. However, such negotiations are allowed today if a seller or buyer is savvy enough to shop for a Realtor in their price range, Dubin said.
While 6% may be the national average for Realtor services, that is not a rule, Dubin said.
In this market, 50-50 commission splits are not the general rule, he said.
“Often the listing agent has a higher percent commission than what is offered to the buyer’s agent or vice versa. Sometimes they take less and offer more to make sure that the property actually gets sold,” he said.
A group of Missouri home sellers brought the lawsuit in April 2019. It led to $1.8 billion verdict that could have increased to $5.4 billion because of antitrust violations.
NAR negotiated the verdict down in exchange for not appealing the case.
Separate cases against Re/Max and Keller Williams have previously been settled. Berkshire Hathaway, owned by Warren Buffett, has not settled its case.
A most likely scenario is that brokers will set a straight fee. Those in the housing market will be able to shop for the lowest priced Realtor.
This does not mean the end of split commissions.
If the seller’s broker chooses, the buyer’s broker could receive a portion of the seller’s fee, much like today. In that case, the buyer’s broker may make a deal with the client to pay only a portion to make up the difference.
For the sake of easy math, if a buyer’s broker’s price is $1,000 and the selling broker gives a $200 commission to the buyer’s broker, then the buyer would owe their broker $800.
There is an incentive for the seller’s broker to share a portion of the fee.
“I don’t think it is going to affect the listing agents as much,” Dubin said.
“The caveat to all of this is if you’re not compensating the buyer’s agent adequately, you’ll have less people looking at the house. It’s in the seller’s best interest to have as many buyers looking as possible.”
“There won’t be any commission language any longer in the MLS,” Dubin said.
“It does not prevent sellers from still offering compensation to buyers. The buyers have to find that out and have to ask the question.”
The rule change will also mandate that the buyer’s broker must enter into a contract with the client specifying what the broker’s expected fee will be.