The recent lawsuit settled by the National Association of REALTORS®, the big brokers, and their MLSs has done a gross disservice to consumers, and most particularly homebuyers. However, sellers are caught up too. First, I’ll try to summarize this suit as succinctly as I can. Some very astute and opportunistic attorneys saw an opportunity to go after the real estate industry, a multi-billion-dollar concern, and they did so very strategically. They went after two brokerages in Missouri and enjoined NAR. They then grew into a class action suit, going after all of the largest brokerages nationwide, and large MLS corporations too. They contended that the compensation model of real estate agents— whereby a seller would list their home for a professional fee calculated as a percentage of the ultimate sales price, and that listing agent would offer a cooperating agent who had a buyer for the home a portion of that fee, without disclosing to the buyer that they were involved in the fee paid to their agent—was without consent. On its face, this assertion was a far reach, but being very good lawyers, they knew exactly how to frame it to make it into a violation of the Sherman Antitrust Act. That’s as far in the weeds as I’ll go into the suit because at this point what’s most relevant is that they won and their condition of settlement, besides a lot of money—of which the many, many plaintiffs will see a pittance and the attorneys will realize a windfall—is that brokers who list homes for sale may no longer offer in their advertising or through the MLS to share a portion of the listing fee with the buyer’s agent, regardless of disclosure.
“Might the home seller be confused or even perturbed enough to reject a perfectly good buyer for their home”
What a mess! Realtors have successfully marketed and attracted homebuyers to their listings directly and through agents representing buyers for many decades. The system has worked smoothly, and agents have been fully accountable to the tenets of fiduciary duty to their clients. Our clients, I should say, because I am one of those agents who has represented sellers and buyers in cooperation with other agents. Besides the reality that buyers and sellers generally understood this arrangement depending on how well they read their agency agreements and how well their agent explained, mortgage lenders and appraisers also fully understood the arrangement and so reflected the values of the properties they were lending on with full consideration of cost of sale, including the professional fees of the respective agents. But now that buyer’s agents don’t know if, or how much, the seller is willing to pay from their sales price toward thebuyer’s agent fee, we must start the homebuying process by explaining that we have to strategize how we, their agent, will be paid to represent them in the process. The options are 1) inquire with each agent whose listing oursbuyer wants to see as to whether their seller is willing to pay what will now be called a seller concession, to the buyer, so the buyer can pay their agent without going unreasonably deep into their pocket, or 2) the buyer pays us directly and we consider that along with their other costs as we consider what price to offer the seller, or 3) we don’t make all those phone calls to listing agents keeping notes of what each one is willing to concede toward ultimately buyer’s agent fees, but instead simply look at properties, pick one and then write an offer requiring the seller pay concession need ed to keep the buyer’s closing costs in check, regardless of whether they priced for that arrangement. How’s that? Clear as mud? Might the home seller be confused or even perturbed enough to reject a perfectly good buyer for their home? Do you feel my pain yet? Imagine going through this conversation with every new client you engage before you can even begin the home selection process. So, as a homebuyer, many will ask, “Do I really even need a buyer’s agent?” Well, that is a fair question, and I can confidently tell you YES. It’s no different than asking “do I really need a doctor? “when something physically becomes a concern, or “do I really need a lawyer?” when you’re up against a serious legal challenge for which there is likely a lawyer on the other side of it, or “do I really need a tax professional?” for my company when I can just get the forms from the IRS and fill them out to the best of my ability and file. In all of these cases you may not need that professional. It might all go quite smoothly. But if it doesn’t, the cost can be catastrophic. Even a nuance can change the degree of success quite a lot. Home sellers are immeasurably benefited by engaging the services of a capable and experienced, full-time, real estate professional. Homebuyers immeasurably benefit by engaging the services of a capable and experienced real estate professional as well. These things I know after having assisted in more than 2,500 real estate transactions over four decades. And next column I will, in depth, back up those claims. Or, you can read it in my blog at thehometeam.com/blog. Caveat: The full terms of what we refer to as the NAR Settlement have not been fully agreed upon, so what I explained above is subject to change between now and the middle of August.
