Who is getting sued? Fortunately not me, and hopefully not you either!
You may have heard about the recent class action antitrust lawsuit recently brought to verdict in Missouri, finding against the National Association of Realtors (a nationwide residential real estate trade organization) and four large real estate brokerage firms. From all the press, it may seem like the entire industry was sued. Maybe, in some ways it was. Time will tell.
In short, the common and long-standing practice of buyer’s agents receiving their compensation from the seller’s sales proceeds was called into question. It was decided that the way it is presented and implemented in the state of Missouri violates antitrust laws.
A jury decided that Missouri real estate agents conspired to keep commission rates high, and that Multiple Listing Service (MLS) rules requiring listing brokers to offer compensation to the buyer’s agent through the MLS caused sellers to pay too much in real estate commissions. The lawsuit also claims that listing agents weren’t clearly making it optional for the seller to pay commissions to the buyer’s agent.
How does this impact you?
You know I can’t speak for the practices in Missouri. Locally, being a member our MLS requires that buyer agent compensation be displayed in the property listing, and that is a binding agreement between agents. I don’t know if it was permitted to offer $0 compensation before this ruling. Our MLS does now allow for no compensation to buyer’s agents.
While 2 ½% commission to buyer’s agents has been a long standing practice, it has never been a requirement of the MLS. Since during my 21 year career I never worked for a discount brokerage, my brokers required that I share 2 ½% of the fee I charge with the buyer’s agent. That has now changed.
How does this impact the process of buying a home?
You’ll love this answer. You’ll be so glad you invested your time in reading this for the wisdom you will receive right here. I have no idea.
You’ll see below, there are more questions than answers.
Do listing agents use commission offered to buyer’s agents to attract (more) agents to show the home? While 2 ½% is standard, before this ruling, some agents offered more and some offered less.
Since the nationwide average of homes sold per real estate agent is under 4, would those low performing agents be more motivated to show a home that offers more compensation (not putting their client’s best interest first)?
If $0 compensation is offered, will the home be shown at all?
Will the use of a buyer representation agreement become commonplace? (This agreement engages a buyer and agent in an exclusive, fiduciary relationship where the buyer agrees to pay their agent a specific commission if they buy a home)
For listings that offer no compensation to a buyer’s agent, will buyers agree to increase their closing costs an additional 2 ½% to have a professional agent engage in a fiduciary relationship and look after their best interests?
Will agents representing buyers agree to possibly work for free if their client won’t agree to pay their fee and the seller offers no compensation?
If no compensation is offered, will buyers decide to pass on seeing that home?
If so, will less showings result?
If there are less showings, will that result in a lower sales price for the seller?
Will buyers forgo having their own agent and rely on the listing agent to simply give them paperwork to sign with no representation whatsoever and no fiduciary relationship, in what is likely their largest purchase and asset?
How will this impact buyers that can’t afford to pay their agent on top of their closing costs?
For buyers that can’t afford to pay their agent because they need all of their money to go towards their down payment and closing costs, will they suffer by not having their own advocate? If so, how will that get measured? Are they being discriminated against? Is this really a best practice for the industry?
For the sake of brevity, these are some of the questions that come to mind for me.
How does this impact you?
Once again, I have no idea.
While it may be attractive to some sellers to not pay the buyer’s agent’s commission, the answers to the questions above and the seller’s tolerance for risk will be the initial driving force of how they decide to move forward.
Compensation to real estate agents has always been negotiable, so that doesn’t change with this ruling. As always, there are pros and cons to every decision. As I teach Halston, she is free to make any decision she wants, and she is never free from the consequences of those decisions. Will compensation to buyers agents potentially impact some buyers who may be considering the property, and/or the sales price of a home? Time will tell.
Would you be completely opposed to sharing your thoughts about this? I’d love to hear from you.