10/31/2023
One of the lawsuits (Sitzer/Burnett vs NAR) just came to a determination via jury -- favors Burnett
Besides the damages, the future in the industry may result in buyer's paying out of pocket for representation in real estate transactions (aka commission to buyer's agent).
How do you think this would effect buyers in the market? How would it effect agents? Do sellers continue to offer a commission to buyer agents to get the most attraction to their listing?
Nobody wants to go to court. But there has been a couple big lawsuits filed against NAR, the National Association of Realtors, and other brokers and local MLSs. Both suits are attacking the compensation of buyer’s agents in real estate transactions. One was seeking class-action status, which could grow into a massive $ amount, in the 9-10 figure range.
Leeder v. NAR, filed in 2021, is stating that buyer costs are inflated through higher home costs - the basis of this argument is that sellers list and sell their home for more $ due to the fact that they have to pay commissions to the buyer’s agent (in most retail transactions this happens).
Well… here is the way commissions are paid out: agent commission % to be paid on a home sale are agreed upon between seller and the listing agent. Typically it is 6%. This 6% is commonly split between the listing agent and the buyer’s agent, 3% and 3%. That original 6% is agreed upon between the seller and listing agent though. Once we get to the closing table, the commissions are paid out from the seller. The point is, the buyer agent does not negotiate the commission paid (unless it’s a for sale by owner listing) and the buyer does not directly pay the buyer agent for their services. Currently in the US, buyer agent services to a buyer is free - no cost out of pocket or at the closing table.
The court has agreed on the basis that buyers do not directly purchase the real estate services of the buyer’s agent. This lawsuit was dismissed this month
Another lawsuit that is still active is Moehrl v. NAR. This suit was filed back in 2019 and argues that the “commission sharing” (3% of the total 6% paid to the buyer’s agent) causes inflated costs for sellers. It also notes that commissions paid to buyer agents are non-negotiable/required in order to use the MLS (Multiple Listing Service) to list the property for sale.
This is an interesting one…
The change they are seeking is having each party in the transaction, buyer and seller, pay for their own real estate services/representation. This would change the landscape of the market as we know it in this country. Other countries operate differently, for example, in the UK and Italy, the buyer pays the commission of the buyer’s agent. Could we see the same in the United States?
As a buyer, would you pay out of pocket for the services of an agent? If so, would this affect your competitiveness on making offers?
I think this could have a significant impact on first time home buyers and the middle-lower classes. Cash is already tight on most buyers. Requiring buyers to pay for buyer agent services could limit them on their options, or ultimately their option to purchase at all.
An alternate solution to solve this issue would be to finance the cost of buyer representation along with the mortgage. This would require some cooperation with lenders and the buyer agent brokers though.
What are your thoughts?
Link to article is in first comment 👇
