The National Association of Realtors has settled the class action lawsuits that put it, and all its members, in the crosshairs. It cost over 400 million dollars, and it’s going to likely be a dumpster fire, at least for awhile.
If you don’t know what happened, the simple answer is that the plaintiffs argued that the NAR and its members were unfair to sellers. The reason? The custom of the seller paying a real estate commission, which was split between the listing agent and the buyer’s agent.
Now, the NAR will pay a massive amount of money to settle the suit and has agreed that no compensation for a buyer’s agent will be on its affiliated Multiple Listing Services — and that’s 99% of MLS’s. In addition, buyer’s agents will have to get a signed agreement with their clients before they go looking for properties that spells out how much the buyer’s agent will get paid and who pays them.
It all takes effect in July. And it’s going to be a mess. An industry that has spent millions of dollars marketing itself as a profession is suddenly thrust into a less than savory position. I’m a licensed real estate broker and own my company. I’ve been doing this awhile. Here are a few immediate issues I see.
Without a clear statement on MLS listings about buyer broker compensation, the settlement says that can be handled “privately.” So if a buyer sends a list of five properties that they’d like to see to their agent, that agent has to contact five listing agents to ask if maybe there’s the seller is offering compensation? Messy. Time consuming. And honestly, it reeks of “ick.”
Buyers really dislike signing a contract with a buyer’s agent. And they resist it until they’ve found a property they want to buy. They don’t want to be tied down. And they REALLY don’t want to be told there’s an additional cost to buying a house that, at least right now, no one has ever budgeted for. Most agents, until now, simply trusted that if they did their job well, there’d be a paycheck at the end. And it generally worked out. Now, a buyer’s agent has to try to sell a client on the value a professional brings to a property search. Ick.
Exclusive Right To Represent agreements, the buyer agency contracts, usually, at least now, say that the buyer will pay their agent when buyer and seller come to a “meeting of the minds.” That doesn’t mean at closing. That means when a contract is signed. I can’t imagine any buyer being willing to pay a buyer’s agent before closing. We all know deals can collapse, for any number of reasons. This form, as it’s offered now, is awful. And if I was a buyer, I wouldn’t agree to it, either. Ick.
Zillow began the trend of making people think that real estate was an easy DIY thing. It simplified the search by using all the listings agents published to their MLS. And it also publishes for sale by owner listings. Now, buyers will absolutely be contacting listing agents directly. They won’t want to have an agent because that would cost them money. So they’ll arrange their own showings and negotiations. Listing agents will be dealing with buyers who are convinced they know exactly what’s going on, even though they may never have bought a property before in their lives. In other words, listing agents are going to be doing more, and likely for a smaller paycheck at closing.
This may finally force a change in the way agents are paid. Right now, salespeople work as independent contractors for whatever company they’re affiliated with. They have no benefits, no salary, and, very often, no real support from their company. NAR is supposed to represent its members. It pushed for professionalism and training. But despite the size of its enforced membership, it never negotiated an affordable health insurance plan, any kind of retirement plans or any other benefits that might make real estate a real career option for most people. The rest of its efforts (and member dues) went into lobbying government for industry-friendly laws that didn’t do anything for the vast majority of its members.
Real estate sales is a job that suffers from a poor reputation, much like car sales. And just like there are some awful people in the world, there are doubtless some truly awful people doing real estate.
But there are a lot of us who went into this field convinced it could be done honestly and with integrity. And we do it, every day. Our reputations reflect the care we take to do the job well. We charge a fair price and we give outstanding service in exchange.
This settlement, and its fallout, doesn’t look like it’s adding to our professionalism.