In what will certainly be one of the most important moments and choices in the history of organized real estate, the National Association of REALTORS® (NAR) has chosen to end its legal fight against a flood of commission lawsuits that have roiled the industry over the last five years, paying $418 million in damages and agreeing to eliminate its guidance around commissions.
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I don’t believe that this ends the uncertainty by any means. The original lawsuit and the threat of those to come exist because the door was open due to the failure of the original legal team to win. And no industry is hungrier for an easy buck than the legal system. Class actions running amuck like the ambulance chasers they are. Now don’t get me wrong, that level of greed exists in every industry. The quick buck at the expense of the people. It’s just more obvious in law. The battle needed to be fought by NAR to show that a significant portion of the real estate industry operates in good faith and in the consumer’s interest. Now, with the settlement, what will the fallout be for the buyers? They were receiving services from agents reimbursed from the sale proceeds through the seller’s side. Should we put that fee for service on the buyer? If so, first-time buyers will suffer the most in a market that has already penalized them through FHA guidelines and restrictions.
In most cases where sellers paid the buyer side commission, it was explained in their listing contract that a portion of their commission would pay for that cooperation. How difficult could that have been to explain to a jury? However, there is some fault to NAR for looking the other way at the “standardized commission rate” that was allowed to lurk in the shadows. And for that, they should be penalized, and that in and of itself may be the reason they felt inclined to settle. However, there is still a great deal to discuss moving forward, especially regarding the buyer representation fees.
I can only see one looser: Buyers. I see clear winners: Corporate Buyers and Sellers, by paying wholesale prices for services when they’re in the selling side -if they ever loosen up their claws on the real estate for profit- and on the buying side of their transactions when they’re dealing with home-sellers by circumventing listing agents to maximize discounts self benefitting. First Time Buyers will likely suffer the most eventually lacking representation they never paid for upfront. NAR should have never settled.
The buyers borrow the money for the home and give to the sellers at settlement, then the buyers spend 30 years paying it back to the financial institute. I just don’t get why the sellers are complaining……
NAR and the attorneys forget a Buyer’s Agent educates them on neighborhoods, different homes on the market, school systems, coffee shops and everything in between. I feel they are hurting the consumer, immensly. And I agree, NAR should have done a better job of representation! Shame on the attorneys. They are the greedy ones!
The states that do not allow dual agency will have to change that law immediately. With no notice of compensation offered for buyers agents, those agents will have no choice but to make an agreement that will guarantee they are compensated for their services from the outset, as stated in this article, when commission offered is a mystery. This will encourage many buyers to look on their own. We’ve all seen buyers who believe they are savvy enough to get their best price but really they are not. These unrepresented buyers will add to the burden of the listing agent. Listing agents will have to do more showings themselves and have to negotiate more often directly with potential buyers. To ask for more than a 3% commission for themselves will probably now be warranted. They also must favor the seller over the buyer. This lack of stated buyer commission on an MLS listing is not wise. Makes transactions more complicated, more time consuming, therefore justifying charging clients more than what is a currently the norm which has flexibility and has never been mandatory . I believe MLS should keep the buyer side commission displayed even if is zero. That way buyers can decide themselves if they want to see a home where they will be required to pay some or all agreed upon compensation. It can affect their financing possibilities as many spend the most they can afford.
I am glad for the settlement. It is a good thing for those included. If approved by the courts, sellers, listing brokers or buyers can pay the buyer agent compensation, said compensation just cannot be advertised in the MLS. There are plenty of easy workarounds for that. Also, having buyers sign a representation agreement just as you sign with your CPA or Attorney is fine. It does not have to state that the buyer will pay. It offers different scenarios and options and an agreement on representation. . It is up to the buyer if they want to see homes where they will be the one responsible for their buyer agent fee. It does not change a whole lot. Now lets settle the buyer lawsuits.
Brilliant! I agree completely! As a result of the recent NAR commission lawsuit judgment, buyers may now face an additional charge from buyer’s agents for professional services during their closing process. A counter suit is needed to defend the buyers rights and balance the outcome of this nonsense judgement. Perhaps lowering the attorneys contingency fees as well?
In light of the recent NAR commissions lawsuit judgment, the National Association of Realtors (NAR) should consider a countersuit strategy. They could gather a substantial number of buyers who are unable to afford professional agent services. This approach might significantly impact the country’s home ownership statistics and prompt the courts to reevaluate the situation.”
It seems like the judge and DOJ aren’t going to let this go down. Especially in these seller-plaintiff lawsuits, it looks like any offer, or payment, of buyer agency compensation by a listing agency is a disservice to the seller client. The listing agency is overcharging, and attempting to justify it by leading the seller to believe that the buyer agency compensation somehow will steer buyers to the listing.
Here, and when we get back to the buyer-plaintiff suits, the part about written buyer agency agreements being required is still going to hold. Any request, or receipt, of compensation by a buyer agency from a listing agency is a disservice to the buyer client. “Mr and Ms Buyer, it looks like you are going to have to commit to pay me directly as your buyer agent. In your best interest, I can’t take money from the seller or from the listing agency. If you want a concession from the seller to cover my fee, you have to request it in your offer to purchase.”
Y’all nincompoop agents are gonna have to figure it out or leave the business.
Y’all FSBOs can keep on floundering, offering your 2-3%, the way you always have.
Why is NAR pointed as a bad and greedy association?
NAR and their local associations work hard to protect realtors and their clients.
I don’t see any word in agreement forms about fixed commissions.
I think the problem is inside the brokerages and how the commissions were split.
There are brokerages that receive a reasonable fee for every transaction and greedy brokerage that imposed this 6% with win-win situation for agents and brokerages.