Will future home sellers actually benefit from antitrust lawsuits that claim Realtor® commissions were kept artificially high?
For decades the real estate industry in America has operated under the “shared commission” or Cooperative Compensation arrangement where the owner of a property who wishes to sell, engages the services of a listing agent who often in turn, works with other buyer’s agents to help locate a ready, willing and and able buyer who will pay the highest amount the market will bear for the seller's property.
Historically this has meant that a property seller pays a real estate industry standard 6% commission of the selling price, which is most frequently split between the listing agent who receives 3% and the buyer’s agent which also receives 3%.
While most real estate agents approved of this shared commission structure and charged the standard commission rate, most sellers felt they had no other option and simply accepted the 6% rate, paying it to the real estate agents at the close of escrow.
Few sellers knew they could negotiate a lower agent commission rate.
Even fewer may have understood how higher agent commission rates typically translated to higher profits for them when they sold because of the dynamics created by the Cooperative Compensation agreement between sellers' and buyer's agents.
To compound the issue, rules established by the National Association of Realtors (NAR) required any listing agent who would promote the property regionally, nationally or globally on any of the multitude of online Multiple Listing Services (MLS) required that a cooperative compensation amount must be paid to the buyer’s agent and that amount must be posted on the MLS.
Without the ability to list a property on the MLS, a property owner greatly limited their pool of prospective buyers, increasing the time it might take to find a buyer and reducing competition for the property which could in turn, reduce the selling price.
While this may not have been a major financial issue for buyers other than limiting their choices of properties to buy, sellers were in a financial quandary.
Sellers felt they had to pay the shared commission to get access to more buyers on the MLS, hoping that would offset (to some degree) the 6% they had to pay.
Otherwise, if sellers offered buyer's agents lower commissions, they took the risk of selling to a small pool of buyers and risked making less on the sale or even worse, not being able to find a buyer for their property at all.
All of this came to a head at the end of October 2023 when the Sitzer | Burnett class-action antitrust lawsuit in Missouri, brought by a group of dissatisfied sellers against multiple defendants including multiple large real estate firms and the NAR, was adjudicated in the favor of the plaintiff sellers.
In the final judgment, the jury awarded the plaintiffs damages in the amount of $1.78 billion dollars.
While the defendants (and the NAR) vowed to appeal the ruling, the entire real estate industry had been served official notice: the old way of requiring sellers to pay for the entire shared agent commission amount would one day have to change.
The appeals process would likely take years to make its way through the court systems, so most agents simply took a “wait-and-see” approach, thinking they had time to keep operating with a “business-as-usual” approach.
But then a BIG surprise arrived on Friday morning, March 15th 2024.
In a surprise turn-around, instead of continuing their legal appeal process, the National Association of Realtors (NAR) that morning announced a settlement offer of $418 million dollars to end the dispute with the plaintiffs.
A settlement that would go into effect in mid-July 2024...and finally went into effect mid-August 2024.
Along with the settlement to be paid out over 4 years, the NAR agreed they would change the cooperative commission agreement rules requiring a seller to provide a commission % to the buyer's agent to be able to list the property on their regional MLS.
Further, it would now require buyer’s agents to negotiate their fees either with their buyer or with the seller, or both.
This rule change leads some sellers to believe that they can now sell their property with a lower commission, thus netting more profit, but can this "no Cooperative Compensation model" really deliver financial rewards to sellers?
Fearful buyer’s agents lamented that they may lose out on deals if buyers now had to pay for a portion of their agent’s commission themselves instead of the way the sellers had always had to pay for both the seller’s and buyer’s agent fees and commissions in the transaction.
While at first glance these rule changes would appear to reduce the amount of commission a seller world be required to OFFER in order to benefit from listing on the MLS, the REALITY is that sellers have been offered a ZERO-SUM solution or worse: offer cooperative buyers agents little-to-no commission, which would likely lead to fewer prospective buyers because many buyers agents will have no financial motivation to show YOUR property, which leads to less buyer competition, translating to lower offers, or worse, no offers at all.
Savvy sellers know that pricing a property to earn the highest amount within the range of what their property’s market value is, and offering buyers agents a commission that motivates them to bring every buyer possible, in the end can cause the property to sell for higher than the asking price, resulting in greater returns for the seller, IN SPITE of, or LIKELY BECAUSE of them offering buyer’s agents a commission.
Citrus Heights Properties understands the market dynamics of the real estate market in your neighborhood and have the experience and skills to price and list your home in such a way so as to maximize your profits.
Citrus Heights Properties agents possess the negotiating skills to ensure cooperating buyer’s agents bring you the best offers at the highest prices, selling your home in the shortest amount of time possible.
With our Desert Property, HOA and Community/City EXPERTISE, advocacy for Veteran's homelessness solutions plus 25 years of industry experience, CITRUS Heights Properties is the only real estate agency you should trust to sell your property.
Real estate antitrust settlement amounts totaling over $907.25M:
NAR: $418M
Anywhere: $83.5M
Keller Williams: $70M
Compass: $57.5M
RE/MAX: $55M
HomeServices of America: $250M
Redfin: $9.25M
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