A Phil Hall Op-Ed: If you’ve been following the kudzu-level spread of lawsuits regarding real estate broker commissions, you might have noticed something interesting regarding the reaction to this litigation. Or to be more precise, the lack of reaction – especially from Capitol Hill, the Biden White House, and the state attorneys general.
The Biden Justice Department did offer a blip of comment last week when it asked a federal judge in Boston to reject a consumer settlement between a group of home sellers and a multiple listing service. The department was unhappy about the terms of the settlement between a group of home sellers and MLS Property Information Network (MLS PIN), a regional database serving New England. In a filing, the department claimed the settlement – which features a $3 million payment by MLS PIN – only “makes cosmetic changes” and will enable the continuation of “stubbornly high broker fees.” However, the judge in the case is under no obligation to obey the rejection calls from Merrick Garland and his team.
It is no secret that today’s Justice Department is hostile to the National Association of Realtors (NAR) – it has been trying to void an anti-trust settlement agreed upon during the waning days of the Trump administration. But the department has been conspicuously quiet in the wake of the Sitzer/Burnett verdict last October – and outside of its relatively mild consternation over the Boston case, it has been quiet about the proliferation of lawsuits targeting NAR, the major brokerages and the regional and local realtor trade groups.
At the other side of Pennsylvania Avenue, none of Congress’ self-proclaimed champions of the working American has demanded an investigation into the question of real estate broker commissions. Even Massachusetts’ Sen. Elizabeth Warren has never taken aim at NAR or real estate professionals for their commission structure – and that’s saying a lot!
At a state level, the attorneys general are also taking a silent and hands off approach to the commissions question. The most obvious lack of input comes from New York Attorney General Letitia James, who had no problem using the taxpayer-financed resources of her office to run former President Donald Trump through court for over-valuating his commercial properties but who hasn’t uttered one word on whether real estate broker commissions are ripping off home sellers.
What can we attribute to this lack of interest? Is it cynical to suggest that NAR is buying support? After all, the data source Open Secrets reported that NAR’s $52 million in 2023 donations made it the second largest lobbying donor during 2023 – only the U.S. Chamber of Commerce put more money into Washington political pockets last year at $69.5 million. I assume that NAR and the state and local realtor groups are also generous with their donations at the state levels.
But even if NAR money is keeping the politicians quiet, that doesn’t explain why supposedly independent agencies such as the Federal Trade Commission and the Consumer Financial Protection Bureau haven’t weighed in on the commission controversy. Nor does it explain why politically motivated groups like the Consumer Federation of America or AARP are on the sidelines with nary an amicus brief to file on behalf of the alleged aggrieved sellers who are accusing NAR and the brokerages of a vast conspiracy to rip them off.
In this situation, the silence by the politically powerful is golden for the real estate industry – no one in the state or nation’s capital is angrily agitating for change in the commission structure. And that’s good news for the real estate industry.
Phil Hall is editor of Weekly Real Estate News. He can be reached at [email protected].
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I think it’s funny that people including the president think that a 2.5 or 3% commission is ridiculously high when car salespeople make up to 30% on cars.
I think it’s funny that you believe car salespeople make up to 30% on cars.
Maybe 30% on the difference between the invoice and what you pay.
My guess is that AARP and such are quiet about it because many Realtors are members of AARP too
They will trash our industry. I really hope all the MLS data is pulled from all these give away free-be sites. I warned years ago that its about the data. Nobody cares about the boards. Zillow sold us all out and now these people see no value in what we all pay thousands of dollars a year for.
The commission percentage isn’t the REAL issue. The real issue is homeowners are upset that Realtors are getting double their commission simply because of market demand and rising prices. They don’t see where the realtor is providing double the service from housing prices in 2019 to today. This approach is simply one way they’re trying to combat it.
So crazy. We need to cut off the sites that take our mls data info and spam it for free to these same jerks who see no value in what we do. I warned years ago about zillow
Sellers are NOT being ripped off by their real estate agents. The lawsuits pertaining to realtor commissions are frivolous. Disappointingly I don’t believe it was adequately or pointedly presented at these trials the meat and potatoes value of realtors, the practically 24/7 work related activities of a realtor and reality that a realtor is the only if not one of the few professions where they work for FREE or hours or weeks and can be months on end – and spend their own money until they close title on a property – IF they CLOSE! Realtor expertise and effort realize thousands and thousands of dollars for their sellers and help to obtain the largest investment that buyers will ever purchase. Often realtors are under paid if anything. So given all of the above I’ve stated – these lawsuits should be dismissed. Someone has an ax to grind against realtors for some reason and their lawsuit never should have gained any steam or grew teeth in my opinion.
I’m a Cal Berkeley Economics grad (1993). These lawsuits are removing opportunities for Americans to make above average incomes and enjoy great lifestyles. I just an episode on this topic three days ago. The episode has some bloopers in it but I think you will agree with the conclusion.
https://youtu.be/te_nQnBRigw?si=e5qoJPgh6FJeBhQg
I think your analysis is spot on. These lawsuits are part of a bigger plan to destroy capitalism by eliminating independent contractor status, the freedom to create and innovate, and competitive business practices.
I totally agree! Having been a realtor for 30+ years, I can personally attest to the myriad of services that realtors provide at no cost to their clients. For Sellers, especially, we begin with preparing the property for sale, recommending licensed and insured contractors to assist the Sellers, sometimes even paying for services on behalf of the Seller. It’s not easy and most times the commission does not truly cover all of our knowledge, labor, guidance, supplies and equipment.
The issue seems to be whether there is any real competition to the MLS. It’s obvious that unless a seller lists their property with an agent that subscribes to an MLS service, no agent will show their property to prospective buyers. This means the seller is required to pay a listing brokerage commission that oddly always seems to be 3%. The seller simply raises the price to cover any commissions thus increasing the cost of the home and embedding the commission in the mortgage. We all know Agents won’t even show a property that isn’t listed in the MLS.
Or, the seller equity proceeds can pay the commission. But that’s not it. The government does not want people making money. Dentistry is getting hit hard too. Health insurance agents saw their commissions reduced by 50% by Obamacare.
Well said………..I got a letter to the editor published in our local marin paper saying many of the same things
Lying about the value of one’s property is, in fact, lying. We need to hold our representatives accountable, if no one else. How can we expect agents to be ethical when those at the highest levels are not? A political life is one under the microscope, and everyone understands that. Red or blue, hold them accountable.
2% (on multimillion properties) to 3% is what I usually see for the buyer or selling agent. Listing agent’s seem to be dropping in some cases to taking 1% and only rarely 3%. So far fewer sellers are paying 6% than was true in the 1990s and there is no commission structure. Commission are negotiable.
Far from regulating what commissions sles agents and sellers agree to, if you were going to regulate anything it would be what commission split new agents start off with with their brokers. Most start at 50% of the 2.5 or 3% coming to their brokerage, and this does not go up until they have paid their brokerage $25,000-$30,000. I don’t think that should be regulated either (though it exists because of previous government regulations requiring the agent to work under a broker and imposing an increasing amount of liability – including exploding fair housing issues – on the broker as well as the agent.)
There is an attack on capitalism. I wrote about this attack as an Economics major at Cal Berkeley. The current administration and some politicians are now going protect the real estate industry. Any industry providing opportunities to provide great lifestyles of you work hard (real estate, cosmetology, dentistry, roofing companies, etc) is a threat to socialist-style governments. I did a YouTube video on this very subject three days ago.
It’s time for change in this industry. It’s inherently unfair to force a seller to pay an opposing party to negotiate against them. No other industry does this…and this industry should be no different. Everyone should pay their own representatives. I’m all for any change that comes from this litigation. The system is broken and it’s time to “unbreak” it.
Guy G must be independently wealthy.
Reality – – many first time home buyers struggle to make a down payment, let alone adding additional commission. The system he loathes actually helps people to achieve the American dream.
If his suggestion is used then far fewer people will be able to afford homes.
I agree with you JPine. There are no regulations on commissions a seller needs to pay a listing firm to sell their property. Where do all these lay people get their information from? All the sellers filing lawsuits are just looking for a settlement. Unfortunately, these brokerage firms are willing to pay them off instead of defending themselves in a court action. It is sad all the way around.
If a buyer or seller wants to negotiate individual commissions, home sales will be delayed by months. I’m not a real estate agent now but I was for 8 years in California. If I offer to sell a $500K for $5,000 commission instead of $15,000, someone can offer $3500 or $1000. Then the same hard work begins to move the house to closing. Final analysis: the socialist government will seize the real estate industry and pay agents $1500 to close deals. No more Hummers for agents.
Guy G. What do you do for a living ? The seller is always in control. They list the property because they want to sell it. They accept an offering because they want to move onward and believe it is a reasonable price.
The attorneys bringing these frivolous cases are making 30%+ in commission/fees on the outcome of these cases. How come no one is talking about this?
I agree, Gail!
Good comment Gail, I think that the goal of these cases is to break the NAR and its lobbying power so the banks can become the “listers” of properties and have more influence on the whole real estate system – not just values, but who where when. We’ll see.
Close. The government wants to control real estate like the government controls healthcare insurance like Medicaid and Medicare. Vote wisely
I agree w/Connie. Most Realtors do not receive a retainer fee to take a listing and see it through CLOSING! It’s a serious job in a very litigious society. And yes our lobby efforts have been effective, but that is hard work as well. It’s a risk too to put your training and preparation on the line every day with no guarantee to close….and what were the negotiated fees 30-40 years ago? Oh yes, about 3-6%……the rub is with property values escalating the numbers are larger, that’s called success…..and the American dream and why buying a home is so important.
I once managed a 75 agent office. The top 10 percent of the agents produced 90 percent of the business!! It appears that this is true in all business. Some people are workaholics and advance the fastest and make the most money. Most people are not workaholics!!! Turnover in RE is extremely high.
It is interesting to me that if the buyer is to pay the buyer Realtor’s commission PLUS come up with the down payment and closing costs, plus come up with the funds for escrow account for taxes and insurance, the buyer pool capable of coming up with these sums is going to diminish the buyer pool. Then sellers will suffer, because of diminished available buyers. I don’t think they have thought this through to the end. Commissions have always been negotiable.
The Seller pays our fee, but they pay it with the Buyer’s money. No Buyer’s money, no closing. This is why they came up with Dual Agency instead of Seller’s Agency only. This way the Buyer gets representation as well as the Seller.
The Government came up with Anti-Trust Laws so that we could not dictate commission rates. Now will the Government dictate our commission rates?
As a real estate broker for 50 years i remember when there was no MLS in our area of Jersey City and or State of New Jersey. As the MLS began providing its service it became a benefit for all of us. Now, we have other sites that take our information and deliver it to the public full of errors. We should not give our information out to the public except via our MLS or through a centralized state & national outlet. One MLS to serve all members to make it easy and convenient to us, and the public.
Furthermore, regarding commissions. We work very hard earning our dollars. Sometimes we work with no pay due to circumstances that arise. Also, from early on our commissions were always negotiable. There can be, a commission that is agreed upon that a broker cannot extend his full capacity. The key to that is full disclosure, meaning what the broker can, will and cannot do based upon the agreed commission. Let’s face it. It’s the seller that determines the listed price and the selling price. We realtor’s or real estate broker’s are the epicenter of give and take transactions. We are the relocation balance needed by all parties. We are the national public economic forum that moves money here and there, creating a flow of liquid assets throughout the country generating the US Economy.
The entire lawsuit is predominantly fraudulent speculation. Bottom line is a seller and a buyer both need a well versed, experienced broker to negotiate for them, in and to their own best interests. The more laws, the more complex it becomes. We must agree to the old terminology of Laissez faire which means that : government policy should not interfere with the operation of natural economics …
The lawsuit is Frivolous !!