Another lawsuit aimed at how real estate professionals earn their commissions was filed this week in Los Angeles.
The new case was filed on Wednesday in U.S. District Court in Los Angeles by Gael Fierro and Patrick Thurber, two home sellers who named the National Association of Realtors (NAR), two multiple listing services – California Regional MLS and Combined L.A./Westside MLS – plus six brokerages – The Agency, Compass, eXp Realty, Berkshire Hathaway HomeServices, Rodeo Realty and Pinnacle Estate Properties – and state and local market realtor associations as part of a conspiracy designed to shake down home sellers.
“The conspiracy has led to various illogical, harmful, and anticompetitive effects, including: (a) requiring sellers to pay overcharges for services provided by buyer brokers to the buyer; (b) maintaining, fixing, and stabilizing buyer broker compensation at levels that would not exist in a competitive market; and (c) promoting steering and actions that hinder innovation and entry by new, lower-cost real estate brokerage service providers,” the complaint declared.
In their lawsuit, Fierro and Thurber are seeking to prohibit NAR from requiring payments to buyer brokers by sellers, claiming that “a competitive market should have forced lower buyer broker commissions as a reflection of the decreasing need for their services.” They are also seeking class certification for their lawsuit.
NAR did not publicly comment on the lawsuit. The California Association of Realtors, which is among the entities cited in the lawsuit, issued a statement that defined the new litigation as being among the new wave of “‘copycat’ lawsuits that have been filed nationwide in recent months” and stated the “allegations are without merit for many reasons.”
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In the most simple terms, the seller is “not” paying the buyer broker commission. The selling broker is sharing their commission with the buyer broker.
The arrangement is between the selling broker and the buying broker, not between the selling party and the buyer broker. I am not familiar with California selling agreements, but in my state it clearly states that the buyer broker will be compensated by the selling broker by being given a share of the selling broker commission by the selling broker.
The most this lawsuit will do is change the language of the contract and make the buyer broker being paid by the selling broker more explicit.
Good and simple answer to the issue. Most importantly all realtors need to abide by the standards as a professional realtor and do not need to add more fire to this law suit.
I agree. However, I don’t think it is fair to say because it is a certain type of market where the buyer agent/broker is not needed. Really! They aid in making the deal come to fruition. Without both parties working together. Most deals do not close.
The simple truth is this: The Buyer is paying for both sides of the commission via the purchase price. The commision is “baked” into the sales price. The consumer always covers the overhead. In a real estate transaction, the Buyer is the consumer, not the Seller.
Yes, excellent concise response! Thank you!
If Selling Brokers can afford to split their commissions with Buyer Brokers than its obvious that Selling Brokers are charging Sellers TOO Much!
This trend may force the industry into time, labor and materials (TLM) charge outs to both sellers and buyers for services, such as that utilized for legal services, contractors and Engineers.
We are going to have to take our data away from them. They’re charging us because they feel like they can do without us and it’s our fault for giving our data away to companies like Zillow and Redfin. We pay for these dues and this MLS data that they’re stealing. They used to not be able to do so well online without us. I hate that they get the stuff for free and they have this arrogant attitude where they don’t even know where it comes from.
Agreed. Zillow and others use
our work and information that we get, and then they want to charge us. It is the NAR that gives Zillow and others our leads. Companies like that are available because of our work. If all of the MLS listings were not shared with these companies, what would they have? Talk about an unfair market.
Totally agree
This is so true!! We did this to ourselves sadly. It would be great to take way the MLS from zillow and all the other sites out there, then see how they “work”… not well!! How can this be done?? I’m planting seeds here!
Yes when Florida boards started selling data we had arguments from older agents. Now Zillow and realtor.com buy our data . Some have websites so they advertise to get buyers and we as agents have to pay referrals for our data for buyer leads .
After real estate commission and these referral fees and agency fees and MLS participation fees and you are self employed and pay taxes. Not a lot of money left over in a net for the agents expenses.
These companies do not want to pay for our MLS data and want to post properties for sale without acceptable commission in the MlS database. The agent with the buyer will cherry pick which property they show first according to the commission offered.
That is market forces. Commissions have been going down since sale prices have been increasing . So much for the “ market forces” argument of the lawsuit .
A special note of appreciation should go out to not just the opportunist plaintiffs, that may feel that they can get something for nothing, but for their council. The attorneys that take up these lawsuits lack the imagination to come up with anything of value on their own…but are very quick to dig up a cousin or old client that bought or sold a home recently to try to hustle a fee.
These attorneys would never, never be able to put the amount of work that it takes to be a real estate agent that is at the beck and call of their clients with absolutely no promise of compensation, however they are very willing to try to sponge some fees off a BS case like the bottom feeders that they are.
Bravo, I couldn’t agree more. There are, no doubt, plenty of lazy agents who don’t do much. That being said, there are also professional, full-time agent like myself and others who work tirelessly (often for months or even years) for our clients before ever making a single dime. These ridiculous lawsuits just take away valuable court time from more important actual lawsuits.
Yes, no one likes to be a tour guide, but that does happen as a buyer’s agent.. Who pays for the gas and abuse by picky buyers.
The buyer’s agent. Who abides by all the seller’s instructions on the MLS? The buyer’s agent. Who has the last word on how much the commissions are doled out? The Seller.
You are right. But look at your MLS board’s financial annual statements.
They charge you for fees then charge venders who want to make money if you for fees, and they have an incredible amount of money in their coffers.
Maybe some positive change for us. Because if my MLS participation is not exclusive , why are my fees high? I’m the one measuring the rooms, taking pictures of the property , not the boats and not the owners.
Are these people trying to kill an already dying “American Dream” of home ownership? This will surely do that.
If Buyers have to compensate their Buyer’s Agents (in addition to coming up with a down payment and closing costs) there will be even fewer qualified Buyers and the demise of the middle class will become a certainly.
Another step toward Marxism.
DISGRACEFUL!
Precisely!
So realtors should work for free??
There is no way many buyer clients would ever be able to afford all the closing costs, unless their broker agent is willing to work for next to nothing. We could become a flat fee brokerage, but how many of them have you seen last? Also, we could demand as was suggested a time and material charge. However, this would discourage buyers to use their broker, thus incurring more in fees, when it is the buyer’s broker that is doing all they can in looking out for them.
The Buyer is the party currently funding both commissions so your comment is inaccurate. There are Buyer Brokers now and that arrangement can work well.
Yes as a convenience to the seller the commissions are funded by the buyers’ funding for the sale , which is a mortgage .
This is getting way out of hand. Seller’s Agent and Buyer’s agent have an equal hand with the responsibility and the know how for a smooth transaction. This is my take with the concerns that we are facing. 6% commission across the board Buyer & Seller should be noted that 3% will go to the other side. If the seller’s agent brings in a buyer in should be a
3 % commision only to the seller. Any listing over a Million Dollars should be stated as a 4% commission using the same illustration as stated above. We all have the right to earn a living FAIRLY This needs to be regulated in some kind of fashion, in order for all of us to prosper and in keeping with the client’s needs and understanding. Jumbo listing maybe 3%
The irony is that sharing the listing brokerages commission with the selling broker was instituted because buyers didn’t have representation at one point. The change will drive pricing down to allow affordability in the market place. I hope all the plaintiff’s are in their forever homes.
As someone who has been in the real estate business over forty years, I believe most people can see how insanely ludicrous this is – except for the bottom feeders who see the opportunity to profit from disadvantaging both buyer and seller. With that said, your assumptions and suggestions allude to price fixing. Realtors can not, must not, suggest, imply, or outright state that there is any kind of “standard” commission rate. Commissions are based on what the broker decides to charge- -period. While the marketplace and the competition may influence that decision, it is left to the designated broker to determine what to charge for their services – based on the parameters that every other business must account for and take into consideration if they’re going to keep their door open..
Good luck trying to get the 6% down to 3%. Your broker will fire you first of all. And then there is the issue of to whom do you owe a fiduciary responsibility. The seller or the buyer? The good RE agents are so few of us that I often don’t meet one for years at a time. Our business is viewed by the public as a burden to society because so many agents act in greedy contemptuous ways. I saw an agent sign up a seller then when she found the buyer was quick to close the deal without advising neither client of their opportunities. She conducted high pressure tactics to the buyer to offer the most amount that the bank was able to lend to them far and above the asking price, with no other bids offered. The deal closed on $1.5mm with her 6%. I was happy for her that she closed the deal, however the buyer latter found serious structural issues with the home and ultimately agent and broker were sued for misrepresentation. When you ask yourself why does the public see us in such a dim light it’s because of so many unscrupulous agents looking to get a fast buck. Our industry has such low barriers of entry and so many poorly trained people it’s no wonder that the public sees many brokers and agents as pariahs.
So completely agree!! It’s always the few that ruin things for the many and unfortunately those are the stories that make the headlines! I also agree the barrier to entry in this profession is not stringent enough. I teach pre license in my state and I truly wish there was a front end pre screen and other stricter requirements before people can enroll. I firmly believe these current events will shake out and seperate the wheat from the shaft!
You already know they’re gonna have a problem with that because of Price fixing. They honestly don’t know what they want. They just want stir of trouble and create more problems in the industry than that are already here. They honestly just want something for nothing. Most agents are not out here making millions of dollars every year. Some agents don’t even see money until months after finally finding that buyer the house of their dreams.
They really should do a survey change up on the listing agreement to reflect the opt out/in option of paying the buyer agent right before this season kicks off. See what the data will bring based on sellers who opt out of paying the buyer agent. Paying attention to how long their house sits on the market compared to homes that opt in. That should be the flow of research to how things should be regulated because I don’t think a lot of them are gonna like this change themselves that they’re asking for.
If the NAR, Local Boards and MLS systems are selling out to companies like Zillow, etc. than why are you so stupid to belong to those organizations!
You just violated a Sherman antitrust law for stipulating a specific commission amount
In Florida in the 1970’s a real estate board got sued federally.
Commissions are negotiable.
Don’t go making a statement about specific commission fees in public. You will get your broker sued.
but the problem is commissions are NEGOTIABLE at every instance at every phase
mandating a commission at 6% is definitely a PRICE FIXING and at the heart of Sherman Antitrust laws
Don’t we all remember basic real estate classes teaching us this??? …
The NAR and local boards are scrambling to allow people to offer 0% to the buyers agent
Let the market decide – it is a point well taken that commisions are always what a seller pays and the COOP fee is up to us … why our lawyers lost that lawsuit (other than the fact that is was a JURY trial – guaranteed to result in an unlawful decision)
If we leave the commission structure up to the seller all this crap goes away … and so it will be up to us to convince the sellers that if they want their house sold through MLS the best commission to acccomplish this is X%
We let Zillow kick us in the ass REDFIN and all the rest
Time to cut them off!!!!
one final point! Realtors came into existence because the real estate market a) did not exist b) we took chaos and organized it c) ethics because everyone was getting swindled out of property d) we made wealth generation possible through accurate valuations
we must return to the starting point of our association and bring it into 21st century
New lawsuit is representative of current low information public in the entire nation. If successful, sellers will lose approximately 5-10% equity due to buyers additional out of pocket down payment needed. Or, buyers lawsuits will increase by trying to buy with out paying for representation to protect their interests. Lose-lose proposition.
We are already transaction brokers here. Not buyer brokers.
Only in commercial sales with sales prices over a million dollars do you have a division between seller and buyer broker responsibilities in Tampa bay Florida.
This is far from over. There is a huge number of hungry Attorneys in this country.
Buckle up.
If buyer is to pay their broker it will be a seller concession just like lender closing costs. If buyers have to pay their fees, first time buyers will face an increased hurdle in getting a down payment together
Please tell me of one instance where a Buyer’s broker was paid before the BUYER placed the money in escrow. This is ignorance of a system which insured representation for both sides.
They better fight back they’re going to ruin our industry and take away the data we pay for
No the data we create measuring rooms and taking pictures of properties. And out MLS boards providing market analysis software.
Agents pay an incredible amount of income taxes. They assist real property buyers and sellers who pay transfer taxes and then property tax. The agents, buyers and sellers then pay sales tax on the items they buy for the home or business. That’s the tip of the iceberg. Home inspectors, title companies, contractors, Home Depot and lawyers all benefit from realtors. Those commissions start a chain reaction that gives a lot of people jobs. Go ahead take it away.
And city snd state revenues from doc stamps and millage rates
Of note, and not yet mentioned… Commission is a FULLY NEGOTIABLE success fee, not paid until all Parties SUCCESSFULLY get to the closing table and it funds. This success fee is actually paid by the BUYER, by way of the purchase price they agree to pay for the property they buy. A solid listing agent will be able to properly explain this to the Seller (which they should have been doing all along!) and based on the value proposition of what the LA brings AND the clear explanation of what the Buyers Agent does to EARN a success fee, (ie. KEEPING THE BUYER ENGAGED with the home all the way to closing and settlement, against inspectors and their results, appraisers and their results, helicopter parents & friends who will always get a Buyer second-guessing the purchase of the property!)
It is time for individual agents to look at the VALUE they bring to their Sellers and Buyers and honestly assess their skills. Have they taken the opportunity to become skilled in a higher way (designations, Continuing Education above requirements, etc.), and have they truly boiled down all the steps they take to show a seller why they are worth the commission they negotiate?? I can tell you in the 9 years I’ve been a REALTOR®, the REALTOR® Expert pool has become diluted. And for such an important and purposeful career we are blessed to do, it is time to raise the bar, or the lawsuits will just keep coming with slightly different language each time.
This industry is the only one that is required to pay someone to negotiate against the paying party. The system is broken and is in dire need of change. And it’s so tiring to see the same old industry cliche’s about who is paying. We all know who is ultimately paying…it’s the seller.
guy … the seller is paying a fee to market the property – if a 1% commission does the trick – success if it is 6% … and it takes that much to attract buyers – success
sellers (especially FSBO’s) regurlary give away 10to20% to sell their homes themselves
then all the escrow and title companies come in and rescue them by completing contracts etc. escrow and title that assist FSBO to real estate contracts should be pursued to the fullest extent of the law
and
so should sellers who screw up on a contract buyers should and will sue them
it is our contracts and assocations and knowledge that keep them out of court!
No seller is going into the hike paying a realtor fee. They are walking away with at least 40-50% profit above the realtor fee.
We aren’t a nation of short sells in which the bank was very matter of fact how little they would pay for a sale.
I am so discouraged by the contempt for fellow real estate agents reflected in these comments.
There is no answer to the question about who pays the commission. The seller chooses to hire an agent. Or the seller chooses not to hire an agent. The seller has proceeds from the sale of their property and maybe they use those proceeds to send their kid to college. Does that mean that the buyer paid for the seller’s kid’s college tuition? No.