NAR $418 million Settlement–  Some big real estate lawsuits have been in the news lately, with many speculating on what changes we will see in real estate as a result. Will agents be going out of business? Is real estate forever changed? What are the new changes that will be put in place? We thought we would address the lawsuits and give our opinion where we think things are going. To give a little background, realtors are paid on commission, and the amount is negotiated with the seller of the house—often 5% or 6% of the sale price–with half of that commission going to the buyer’s agent and half going to the seller’s agent. Both agents pay their fees, taxes, and expenses from the total commission they receive. Agents do not receive an hourly rate or salary, so most of the work they do is unpaid until or unless they receive a commission when a home is purchased or sold. The major lawsuit that has been in the news is the Sitzer/Burnett Lawsuit. Here’s some of the details: “In late October 2023, an eight-person jury in Missouri found Keller-Williams, along with defendants, NAR [National Association of Realtors] and HomeServices of America, liable for colluding to artificially inflate real estate agent commissions. The jury awarded full damages of $1.7 billion, which under federal antitrust rules is tripled to over $5 billion . . .” “Central to the Sitzer/Burnett suit, as well as the other commission lawsuits, is the NAR’s Participation Rule, which requires listing agents to make a blanket offer of compensation to buyers’ agents in order to list the property on a realtor-affiliated multiple listing service (MLS). According to the plaintiffs, commission sharing inflates the costs for consumers, in violation of the Sherman Antitrust Act.”  One important thing to note is that every state has its own real estate laws, procedures, and paperwork, including its own listing service (MLS). Because Utah has been somewhat unique compared to other states in the way we do real estate, this lawsuit and others should have less effect on us. The main argument in the Sitzer/Burnett lawsuit is that real estate brokerages colluded to keep commission rates at 5% or 6% in Missouri in part by requiring buyers & sellers to work with realtors when buying or selling real estate. In Utah, however, this requirement has not been the case. Utah allows owners to sell their property “for sale by owner.” Likewise, individuals may purchase a home without a realtor. The state of Utah provides real estate purchase contracts that are available online, and even then they are not required (you can write up a legal real estate offer on a napkin if desired!) In addition, sellers are not required to offer a specific commission to buyer’s agents in Utah. We have many discount brokerage options like Homie and Redfin to sell homes. Remember, however, that even though there are no legal requirements in Utah for a seller to offer a buyer’s agent a certain commission, market demand does come into play. Many agents will not promote listings that only offer, for example, a $500 commission or 1%. So, our advice to sellers has always been to offer a full commission of 2.5% or 3% to get the most eyes on, and best offers for, their home. By not compensating buyer’s agents, the seller often ends up selling the property for less. The exception was the crazy market of 2021 when anything that came on the market sold fast! But, in a regular market these issues come into play.  So what is likely to change? According to the settlement reached with the NAR, the realtor associations will no longer create rules that require listing agents to set commissions for buyer’s brokers or display buyer’s agent compensation in the multiple listing services. Further, buyer’s agents who use the MLS will be required to have a written buyer representation agreement in place with buyers before looking at homes together. None of these changes are expected to take place until July at the earliest. The settlement still has to go through the courts and will likely be scrutinized by the Department of Justice. Although sellers will not be allowed to publicly post commissions for buyer’s agents, it is highly likely they will still be offered by sellers who want to have the highest market demand for their homes. Buyer’s agent commissions will probably be discussed between the seller’s and buyer’s agents or communicated in some other manner. In Utah, sellers have always had the right to offer to buyer’s agents any commission amount they wanted to on the Utah MLS. Another part of the settlement is that realtors must have a buyer broker agreement before showing homes. Actually, this was already supposed to be happening. Now these agreements will be more important because they will list what the obligation will be of a buyer to pay their agent if the seller is not offering a commission. Because of this, some buyers might be afraid of the potential cost to them on top of their loan fees and down payment. More buyers might opt to purchase without a realtor, which means they won’t have an experienced professional looking out for them, negotiating for the best price, and watching for pitfalls in transactions. As a result of these changes, some realtors might exit the industry. Talking about commissions has never been our favorite part of real estate and there will be some uncomfortable conversations, especially between buyer’s agents and their clients. It’s important to note that while some people don’t want realtor help and would prefer to save on fees, the majority of people do appreciate the help and like a concierge service that will take care of all the details of selling their house for them. Most people only buy/sell 2-3 homes in their lifetime and it can be a scary and daunting process. Here is an additional article with some great clarification and thoughts about the NAR settlement: If you have questions about the NAR settlement or need help buying/selling a home. We would love to help! Ashley, Elizabeth & Deborah Follow us on Facebook and Instagram for travel tips, new listings, and home design inspiration.  Check out our newest listings, and please feel free to reach out with any questions about the real estate market! 801-830-1717 |
