An ongoing federal class action lawsuit challenging the long-standing practice requiring the brokers representing home sellers to offer compensation to the homebuyers’ brokers may upend the U.S. residential estate market as we know it. The plaintiffs in the case allege that the National Association of REALTORS® (NAR) Participation Rule, which requires listing brokers to advise buyer brokers how much they will be compensated for finding a buyer in order to list a property in REALTOR®-affiliated local Multiple Listing Service (MLS) broker marketplaces, is an antitrust violation that inflates seller costs.
As a REALTOR® for 30 years and President of NAR, I can emphatically state that nothing could be further from the truth, and I’m concerned about the negative impact these misrepresentations—and ultimately a verdict for the plaintiffs—could have on homebuyers and sellers across America. However, most Americans who are less familiar with the intricacies of the real estate market do not understand what’s at stake, the magnitude of this trial and its potential implications for buyers and sellers who are already facing housing affordability and supply crises.
It all starts with local MLS broker marketplaces. Hundreds of these virtual marketplaces exist around the country as databases of all the homes for sale in a given market. That means a buyer can work with any agent participating in the local broker marketplace and get access to the widest selection of properties. Meanwhile, sellers get access to the largest pool of buyers. These marketplaces are by far the largest and most trusted resource to make the best and most informed decisions about buying and selling a property.
Because listing brokers and buyer brokers come together in these marketplaces, there is greater efficiency and equity for first-time, low-income and other homebuyers across the country. What’s more, because the commission is shared between the seller’s broker and the buyer’s broker, first-time, low- and middle-income buyers get a better shot at affording a home and professional representation. If buyers had to pay their real estate broker themselves, it would make it harder for many Americans to afford a home because they would need more money upfront for the down payment, closing costs and agent fees. Or they could forego using a broker in one of the most complex and expensive transactions of their lives—a risky choice for even experienced buyers.
Without MLS broker marketplaces, there would be no dedicated home for all the verified, up-to-date listings. Information on homes would be inaccurate, unreliable and scattered across real estate sites. Buyers and sellers likely would have less choice among brokerages, services and compensation models because all those businesses would not have one place to come together. Instead, these marketplaces provide everyone with a means of entry to the same set of verified and complete housing information. That’s because buyer and seller brokers are putting their most complete and up-to-date information into these centralized databases.
Real estate agents who know or have worked in other nations recognize that these local broker marketplaces in the U.S. create efficiency, equality and value for consumers. The U.S. operates in a free market with no hidden or extra costs or fees and with information that is accessible and accurate. Everyone can count on that kind of transparency to make the best choices in selling or purchasing real estate. Compensation is negotiable and can be negotiated at the outset or as agreed to by the parties at any time before the transaction closes.
Having access to MLS local broker marketplaces is what makes it possible for professionals like me to best serve both buyers and sellers, creating the most consumer-friendly market possible. And the beauty of it is that in the process, I can connect more sellers and buyers and create greater access to more homes for sale. It’s a win-win all around.
To ensure the most consumer-friendly market possible, NAR’s Participation Rule must be upheld for the sake of efficiency, transparency and accuracy. Greater cooperation among real estate professionals will always bring more buyers—particularly first-time, low-income, and first-generation buyers—to the table with sellers. And, at the end of the day, isn’t this what we want, for more people to be able to achieve the American dream of homeownership?
For more information, visit https://www.nar.realtor/.
Oh Tracy, I remember will when there were no buyers brokers or buyer representation. I loved it, and found this omission very efficient. The listing Broker/agent could not hide any adverse anything affecting the property FROM EITHER SIDE, buyer had to be qualified and seller had to tell the truth about the septic tank. Anybody withheld anything at all, knowingly, and a good ole fashioned law suit was on the way. No, I think you are over reacting and there needs to be some distance between the listing agent and this forced–and it is ALMOST forced–buyers agent mess we’ve gotten ourselves into. In the beginning, buyers agents were the listing/selling failures who couldn’t/wouldn’t get up and go to work, looking for some free and easy pokie. Same for home inspectors, they originality were failed contractors trying to stay alive by getting someone to pay them to turn on a stove and a dishwasher for them. I’d like to see them all go. Nothing wrong with AMERICANS returning to caveat emptor! Seems we’ve all been turned into a bunch of limp wristed crybabies wanting someone to take responsibilities for THINGS WE SHOULD BE DOING FOR OURSELVES AND KNOWING HOW TO DO THEM. If someone is so un-knowledgeable as to be buying a home without a clue, he (she) will soon get an unforgettable education, or not. CAVEAT EMPTORD!!!
I agree 100%. The first 25 years of my career was managing the assets of multiple high-rise properties, including selling and buying portfolio properties. Agreements of how Commissions were paid was negotiated at the start of meaningful discussion. Leasing was the same. We had our Leasing Agents and many Tenants had Tenant Representatives. Fees were negotiated up front and everyone fully disclosed. The 20 years I’ve spent in Residential Real Estate has been no different. Sellers can already decide how they want to handle commissions. It’s written in Listing Contracts in most States. We discuss pricing, commission options and potential outcomes. It is the Sellers decision how to proceed. Some Buyer’s do pay their own commissions. Forcing Buyers to pay their own Representation will eliminate so many Buyers from ever owning a home. We were all first-time Homebuyer’s once. It’s such a scary and exciting time, informed decision are mandatory. Many barely have the resources to purchase a home. They often rely upon Federally insured loans, requiring only 0-5% down. Since the last market crash Private Mortgage Insurance (PMI) is for the life of the loan. It used to be only until the home hit a certain percentage of equity. Interest rate increases have nearly doubled the monthly cost for Homebuyers. This is putting housing further out of reach and will potentially prevent an entire generation the opportunity to build equity for their family. Rates will likely remain at this level for some time. They don’t just drop back to 3 & 4%. Homeownership is a ritual in our country that is being pulled further out of reach for people who don’t have resources, but can afford the mortgage and maintenance cost. Increasing rents make saving nearly impossible. Many will be financially forced to have no Representation in their purchase. A Broker or Agent can protect Buyers from skipping inspections and guide them through the due diligence of purchasing a home. The nuances of a purchase cannot be written into a learning guide. Every transaction is unique on both sides of the table. Our job is not to make certain the transaction closes, it’s to represent our Client’s best interest. Demanding separation of commissions will cause further distance between people with generational wealth and those without. Let Sellers keep the decision that is already their option.