The National Association of Realtors (NAR) has been involved in significant legal controversies regarding its practices and policies. Two primary complaints have emerged:
Antitrust Violations: The U.S. Department of Justice (DOJ) filed a civil lawsuit against NAR alleging that it enforced anticompetitive rules that diminished competition among real estate brokers.
Class Action Lawsuit: NAR faced a class action lawsuit where it, along with major real estate brokerage firms, was accused of conspiring to inflate the commissions paid by home sellers by requiring them to pay the buyer broker’s commission at an inflated rate.
The settlement agreement between the National Association of Realtors (NAR) and the Department of Justice is a proposed settlement that still requires court approval to become enforceable.
The class action lawsuits against the National Association of Realtors (NAR) have reached a settlement, but it is not yet finalized. The settlement terms require court approval before they can be enforced.
What’s changed in the way we sell real estate? Neither the DOJ nor the courts have finalized either proposed settlement. This system has been the standard operating procedure in the United States for over 100 years. As of this writing, it still hasn’t changed.
In real estate transactions, a Realtor’s listing fee is always negotiable between the seller and the listing broker. Additionally, the commission that the seller authorizes the listing broker to offer to the buyer’s broker is also a negotiable term.
Locally, it is common for listing brokers to be authorized to offer a 2.5% commission to the buyer’s agent through the MLS. However, this rate is negotiable and can be strategically adjusted based on the specific circumstances and agreements of the real estate transaction.
Since the commission a seller authorizes a broker to offer a buyer’s agent is negotiable, including potentially offering $0, it opens a strategic opportunity to possibly increase the net proceeds from the sale of a home. Lisa, from my team, has an upcoming listing in Plumas Lake where the seller has chosen not to offer any commission to the buyer’s agent. While there is a common belief that agents won’t show properties without an expected 2.5% – 3% commission, the reality of modern real estate markets contradicts this.
Today, buyers often find properties online themselves and may visit open houses without their agent’s involvement. If a buyer is interested, they often involve their agent later in the process to make an offer. In real estate, “agency” refers to a fiduciary relationship where the agent is legally obliged to represent the interests of their client—the buyer in this case— and must show all properties the buyer is interested in, regardless of the commission offered. Thus, not offering a commission might not significantly deter visibility if the property is appealing and well-marketed.
Most local brokerages now either require or strongly encourage their agents to sign a Buyer Representation and Broker Compensation Agreement (BRBC). This agreement ensures a specific compensation for the buyer’s agent, which may be a certain percentage, a flat fee, or a combination thereof. If the seller offers the agreed compensation, the buyer is not liable for it. However, currently if the seller’s offer is below the agreed amount in the contract, the buyer must pay the difference to their agent.
So back to Lisa’s seller. Most buyer’s agents, under a signed BRBC, will likely include their commission in the offer, asking for a 2.5% fee. However, by initially offering $0, the seller can counter with a lower commission, such as 1.5%, potentially saving $4,300 on a $430,000 home. This tactic introduces a new negotiation point, which could influence the final net proceeds of the sale. I’ll update you on the outcome in about 60 days.
In summary, the outcomes of the class action lawsuit and the antitrust violations involving NAR are still pending. It’s important to note that commissions for both listing and buyer’s agents remain negotiable. Employing a strategy of offering zero commission could be a tactical move in real estate negotiations. I have upcoming listings in Citrus Heights and Grass Valley, priced at $800k and $700k respectively, where both sellers have chosen to offer 2.5% to the buyer’s agent. Call me if you would like to discuss this evolving topic.
