The Department of Justice has made its first foray into the growing number of lawsuits regarding real estate commissions by asking a federal judge in Boston to reject a consumer settlement between a group of home sellers and a multiple listing service.
Reuters is reporting the DOJ is challenging the terms of the settlement between the sellers and MLS Property Information Network (MLS PIN), a regional database serving New England. In a filing, the DOJ 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.”
Sellers listing their property on MLS PIN were required to offer compensation to a buyer’s agent, which could be as low as one cent. The settlement would change the MLS PIN rule to allow sellers to make zero-dollar commissions, but the DOJ disapproved of that change.
“Virtually no one will exercise that option for the same reason that they don’t offer one cent now: The modified rule still gives sellers and their listing brokers a role in setting compensation for buyers’ brokers,” the Justice Department said.
The case in question is Jennifer Nosalek et al v. MLS Property Information Network et al, which is before the U.S. District Court for the District of Massachusetts.
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These lawsuits are stupid. If I charge X%, I can pay what I want to a marketing company, transaction coordinator, handy man, buyer’s agent, charity, etc. Do attorney disclose what their secretaries, assistants matketing managers, etc. make from what they charge. When I was a roofer, it was my business who I pay for what as long as I got the job done for the AGREED Price.
I agree, sellers know upfront what the total commission is why is it not considered a separate agreement from the listing company to the cooperating company. I see it that, my company gets paid the full commission, but we offer to the buyers brokerage a certain percentage, it is simply smoother to have the coop commission paid directly to the other brokerage at closing. None of these suits seem to look at it this way.
This is a case that’s a big waste of time. As long as buyers and sellers know upfront what’s going on and who’s paying who there’s no problem. It’s one of those if it ain’t broke don’t try to fix it situations. Those sellers who are complaining about paying the buyers agents have to realize all the money is coming from the buyer in the first place.
The contract is between the seller and the Sellers’ agent for one set negotiated commission. Since the beginning of commission based selling of Real Estate commissions have been shared. An agent from New York for example can refer a seller to a Connecticut broker and the Connecticut brokerage firm would in turn provide a referral fee from the sell side of the commission of the sale of house. Then if a buyer’s agent should bring the buyer, the buyer’s agent will receive a percentage of the total sale price. Each percentage of the total commission paid out to the referral agent and the buyer’s agent is decided by the selling agent’s firm. The total commission is decided between the seller and seller’s agent. The way the commission is divided up is no one’s business.
If the selling agent brings the buyer then it’s a duel agency and the seller’s firms earns the full commission. The duel agency is disclosed to all parties. But the commission paid is between the seller and seller’s agent
Also currently a buyer’s agent now can ask that the buyer’s agent take less of a commission and leave the balance to be reduced by total sale price. There is need for changes in the way a commission is divided up. Because the commission can be negotiated up front with the seller. The buyer can negotiate with buyer’s agent to reduce the buyer side of the commission and a referral fee is also negotiated.
All this law suit is trying to do is to lower the commission rates. Which can be done now with the way the current laws are written.
Moreover if a buyer doesn’t want the commission to be paid by the seller. The buyer is free to pay a commission directly.
No buyer is going to want to pay a commission.
The thing that is overlooked with the commissions paid to buyer’s broker is, the buyer’s agent does most of the hard work. That is why so many agent will only take listings. The buyer’s agent has to spend hours/days/months showing clients listings which they may or may not buy. I have been on both sides of the transaction. In short, agent earn their commissions.
I think judges are overpaid and we should reduce stop them from hearing cases and just work it out between the parties. Less costs and our legal fees could go way down. Any time you get someone who doesn’t understand your industry making decisions for you, then we lose.
I am from the government and I am here to help!! The nanny state is growing and driving out businesses and driving in inflation by its desire for a command and control government.
Perfect
Why Attorneys get paid what they get?
Why Doctors get paid what they get?
For that matter a plumber , electrician, lawn mower etc
I think this is a lead for class action suits on every trade waiting to happen. Attorneys are having a field days
The federal government should not be able to tell a broker what he can charge and how he compensated another broker for bringing a buyer that purchases his sellers listing as long as the seller. Is fully aware and agrees to the cost of selling in a writing contract.
Right on the mark. Brief and simple. Good job Paul
I believe it’s the right of the Seller to offer whatever he chooses in commission and that he should also be the judge of what a hard working Buyers agent is paid from what he offers
In general, a seller has little or NO contact with the buyers agent, and in reality will have little or NO knowledge of a selling agent (buyers agents’) efforts and expertise. Most of the time it comes down to responsiveness and cooperation between the agents. After 53 years at this, and much success, I am terribly disappointed in the industry direction. regards to all
Typically the listing price includes the real estate commission and is based on comparable sales. The Seller is not obligated to use the Real Estate agent and can sell the property by By-Owner.
I am curious as to whether anyone can identify another business model in which a seller pays for the representation of a buyer? Second, I am also wondering when anyone would buy a product (other than a home) and pay commissions and/or compensation to the party that works to their disadvantage? I have always struggled with the idea that as a seller of a home, we have any duty to insure that the broker protecting the interest of the buyer is paid. Why wouldn’t that duty fall to the party receiving the representation as is the ordinary practice in other compensation models?
No one forces a Seller to work with a Real Estate Agent. And Actually the seller is paying the listing broker the commission to sell the house, let’s say 6% and the listing agent ask for help from agents for buyers to sell the house and split the commission. What is wrong with this. It is all negotiable. Sellers do great and get great benefits for the agents service, get great prices when they get multiple offers, etc.
Buyers are already have difficulties with extremely high interest rates, closing costs, etc etc.
All negotiable. No one is forcing anyone to do anything. Take it or leave it. I share my commission with other agents that have buyers, what is wrong with this???
The sellers broker is not representing the buyer and is not against you. If a buyer wants direct representation then the buyer contracts with an agent to be a “Buyer Broker” and the buyer pays the agent, not the seller. If the agent has been contracted to be a “sellers agent” then they can’t work with the buyer at all. If the agent is working as a transaction broker then they can work with both sides with limited representation for both sides.
Every Seller can easily put the sign up FSBO and do all the work. No commission paid to anyone. This is free country free market but nothing is free.
The only reason a seller cooperates with the buyer’s agent is because the buyer’s agent is
the one who put the best deal for the seller on the table. If the seller doesn’t want any buyers’ agents cooperating with them it means less exposure, less exposure usually means less money, if we all represented the seller, why would any of the buyers work with us at all.
My problem is when the seller determines the Buyer Broker Fee, why should the Seller determine how much I charge to my buyer client? In addition, why can’t the buyer finance my fee? Why should they have to pay separately. At the end of the day its 6 of one and 1/2 a dozen of another. The gross price is the gross price, and the net price is the net price and as the saying goes it all comes out in the wash. All this is going to do is hurt both the buyer and the seller. Just my opinion.
If buyers finance the fee, this will increase the appraisal value needed and further inflate property values.
The word representation is tough because who is representing who is oftentimes misaligned and not properly disclosed. Real Estate is an industry that does a really good job of protecting and informing consumers. When you think about other businesses, many are extremely similar. Insurance brokers. Mortgage Brokers. Art dealers. Consignment shop operators. Grocers. Contractors. Car Dealers. House cleaners. Auctioneers. Warranty program sellers. Daycare Centers! Property Managers. Carvana and like style service. The list goes on. Think of Insurance…when you call up your insurance broker and they are helping you put together the best coverage for your particular and personal needs, are they representing you? Do you know how much of your premium payment goes to pay that Broker and how much goes to pay the company who underwrites the policy, or the actuators, marketing departments, loss/payee departments, etc.. Who are you actually paying and does any of it go towards your representation? Grocers…when you pay for the loaf of bread how much of that is going towards the bread, the packaging, the marketing, the checkout person, the baker. You are willingly paying $5 for a loaf of bread because the grocer offered it to you for $5. Is it any of your business what that grocer does with the $5? Now add representation into that…Amazon is selling you that same bread for $5. They are representing your interests to get that bread to you. It is still $5. The grocer is paying Amazon a part of that $5 to market the bread on their site and then bring it to you. Does that mean that you should now sue the National Grocers Association for conspiring to keep the cost of bread high? Contractors…when you last hired a contractor to replace your roof, your siding, and two windows, did you know that he would be using a sub contractor or even three? Did you know that he would be purchasing materials on your behalf to complete jobs and that these materials might be upcharged? You agreed to a project price and the contractor agreed to get the job done. So, was this contractor representing you, or the product supplier, or the sub-contractors, or himself? You agreed to a price and what that contractor does with the money is not really your business if the job is done. Right? Or, should we now be able to sue national, state, and local professional contractor associations for conspiring to keep home improvement costs high? Home Builders…here we go again. The home builder is taking money from you, money that is built into the cost of the house, and they are paying all kinds of people out of that money, none of which are representing you. You are paying that builder to represent you in the building of a house and that builder is using some of that money to negotiate for services that could actually be a detriment to you and the quality of your house. Should the National Association of home Builders now we sued for conspiring to keep building costs high? There are no perfect one hundred percent parallels to be drawn because nothing in this world is the same but it is quite simple to see that in real estate a seller agreed to pay a commission for a job to be done. The job was done. If it was not done no money would have been paid! Now attorneys are convincing sellers that they can get their money back. Not one seller is required to use a Realtor. Just like you do not have to go to a grocer to buy bread. You can make your own. Oh, wait, you need flour. Grow it? Eggs. Do you have chickens? How about yeast? You need your own bag to keep it in, too. Geez, it might be easier to just go to the grocer. Ok, now sue the National Grocers Association because you did not know that your $5 was also being used to pay for the company who supplied the bag the bread is packaged in and if you had known you might have been able to talk that bag supplier down in price! This is kind of the kicker here…you do not have to use a real estate agent to sell a house! Every industry in America should be standing up and taking notice of this suit and saying NO. This is not ok. They better stand up quick because if this verdict holds, there is not one for profit company that will be safe from having to pay back what they have earned. Even if the job was done perfectly! Now, I know that this reply is far too long and maybe no one will read it. According to this case most people do not read things and when they do they cant understand them anyways.
I read a post about a real estate seller advising to diy (fsbo in RE terms) saying not to hire an attorney who charges 33 1/3% when a buyers agent is at least minus 30% of that! so it is the lawyers taking the big money, not the Realtors buyers or sellers agent… who do a lot of work for zero pay. I have been there!!
The Seller signs a listing agreement and on that listing agreement it tells the Seller what is being paid out to the Selling Agent. No surprise there!
I thought we live in a free country where we compete to get business, but I guess I was wrong. Why all of a sudden anyone cares how much real estate agents charge for their commission? If you think an agent charges too much in a commission % simply avoid working with him/her
It is just like any other industry, people are looking for the best price. Based on that stupid lawsuit now we can sue any industry clamming they charge too much. And,, no there is NO conspiracy between brokers on the commission, the commission is negotiable.
will this go into commercial real estate too???
The bottom line in all this, buyers will be including brokers fees to the seller in the offer, the only change is it’s one more thing to muck up a transaction.
( Sellers to pay up to and no more than $9000.00 towards buyers closing fees including fees to selling agent)
Just as buyers ask sellers to pay closing costs they will ask sellers to pay buyer agent commission. This just creates issues for buyers. They don’t have the money for down and paying agent. Common sense is gone in government
The only solution is to mandate the split in commissions. 50% to the seller’s broker and 50% to the buyer’s broker. The rest will take care of itself.
The Americans is going to be stupid and misleading by democrats. It will destroy the basis of America economy.
The listing Agent’s job is to market the home, and give the seller the best opportunity to meet all of their objectives in the sale. Most of the time, that means more money. To ensure this happens, they offer the buyer’s agent a share in the commission. If you are a buyer’s agent, and you have 5 homes offering you a fee for your services, and 1 that offers nothing, which homes will you show? We do not work for free. It’s bad enough that we have to pay fees, dues, advertising, etc. This on top of splits with lead sources like Zillow, team splits, and brokerage splits. As previously mentioned, the seller has a choice. To ensure a quick sale, at top dollar, it’s in their best interest to pay the fee. They will make up for it in the end with a higher price, and multiple offers.
While I agree that commissions should be fully disclosed, and are required to be in my state, I also feel this is an overreach. Two consenting and culpable adults entered a contract, with signed documents, that explained who’s paying what where… that’s fully legal contract law.
Second, it’s quite moot on who’s paying what on a closing. One party has the property, one party has the funds. It all goes into a pot (escrow or trust) and is paid out according to the disbursement or assignments. As such, there’s no real difference if the funds were paid by the seller or the buyer; we started with and ended with the same dollars going to the same parties. If the buyer agrees to pay $300,000 and the seller refuses to pay an item from the closings, then the buyer pays it; the seller doesn’t receive those funds, so it came out of the seller’s funds regardless. Only when it changes the amount paid OVER the agreed price does it matter. Commissions, generally speaking, are taken from seller’s proceeds, so it does not go over the agreed sales price.
Are you against Buyer Agents???
Solution; FOR SALE BUY OWNER!
Result; YOU WILL BE BACK!
Don’t let anyone use you to start the control of competitions in the private sector. it does not end there. Folks always think what will be next.
IF we comment and don’t do anything our business like many others in the past will be finished. Nobody will work hard and fraud will be on the rise. We all took the time to learn all these things and pay into these associations for the precious data that was given away for free to companies like Zillow and Redfin. Sellers now feel they can do anything a realtor can. They feel getting a buyer isn’t worth paying anything. They all knew everything they were paying.
Remember sub-agency? In the early 90’s some buyers got upset after the sale finding out their agent was a sub-agent of the seller. This forced the change of going to buyer’s agents/seller’s agents. There was a brief shift where buyers would pay their agents’ commission. Try doing that in a tough market though. Closing costs are already 2-5% of the sales price, depending upon what part of the country you live. Having a buyer also pay commissions to their agent will diminish the pool of buyers that can afford a home.
Sellers are told before listing what the costs/commissions are and quite frankly, I have never had a seller not want to co-operate with other brokerages. For the record I have been a licensed agent since 1986. A prudent seller knows this will help bring a larger number of buyers. It is called cooperating between brokers. Just because a buyer is getting representation doesn’t mean the goal is to jeopardize a transaction. Bottom line, a home will sell for what a buyer is willing to pay and a lender is willing to lend. An experienced & successful real estate agent has the skillset (negotiating, marketing, etc.) to cooperate-& help facilitate a successful sale between both buyers & sellers.
Very well said! I totally agree with you on this one!
Exactly!!! The big issue in my opinion is that the buyers, and sellers, don’t actually read, or understand, the listing agreement, or buyer’s agent agreement. And the agent’s explanation of the document goes in one ear, and out the other. They just want to buy, or sell, and the “legal documents” are just a formality to them.
The government screwed mortgage brokers 12 yrs ago and put 80% of them out of business by giving the power to the banks. Now they intend to screw the real estate agents out of earning a living and will give the power to online companies like redfin and zillow.
Commissions have always been negotiable and the government wants to find a problem where there isnt one.
I have been agent for 35 years in my opinion change is coming to our profession. Plan ahead and be prepared this will pass in time . At the moment the experts don’t have a lot of guidance we’re in limbo . Stay the course .
I totally agree with you. Perhaps Zillow, Trulia, Redfin, Realtor etc all need to be boycotted. I totally agree they are behind this so they can totally control the real estate industry
These lawsuits are so stupid. Why aren’t the Association that we pay protecting our profession? These class action lawyers are just greedy. Let’s do a class action lawsuit against them and mandate their outrageous fees! I suggest looking into the law firms and individual lawyers behind these lawsuits. Seems like a personal vendetta against realtors . The seller
knows about commission during the listing agreement. And it is negotiable. I don’t think lawyers that don’t understand our profession and how hard we work
should be able to change a damn thing related to our commission.
Agreed Sharolyn…..insanity. And greed by lawyers. Unfortunately, some of the “big guys” have ponied up just to get them to shut up. All they’ve done is the same thing that Ransomware attackers do: Pay me to get your stuff back or I’ll keep it”. And no real guarantees that you’ll get your data back! So, other lawyers will jump in and see if THEY can get a settlement, too. NAR needs to countersue as a class action suit brought by all Realtor members…..AND make them pay for the legal costs!!!! Unbelievable!!
I’d venture a guess that Zillow, Redfin etc are paying these lawyers plenty to do this. These big corporations that realtors have paid for years to in turn screw us, want the whole pie. Taking our listings and selling them for a fee was something NAR should have NEVER EVER allowed in the first place
I would submit that this is “illegal restraint of trade” if upheld in any way. Virtually EVERY salesperson makes a commission. If they uphold this based on the fact that our commissions “inflate” the sales price, then I would also submit that commissions on ANY sale inflate the price! Are you going to get car salespeople to drop their commissions, and those are NOT revealed to the public? Drug companies (oh, don’t even get me started there!)? Internet sales providers? Public Utilities? Airlines? Unless you outlaw ALL commissions, you shouldn’t outlaw or limit ANY commissions!
That has always been the incentive for ANYONE to be in sales and the way most of us/them are paid.
(Rant over…)
I agree with 100% . Time for us realtors to fight back. Where is the NAR in defending its members? Oh right. Probably in the same place they were when they gave Zillow, Trulia, Redfin etc the ability to steal our listings in MLS
If you have a buyer client, treat that buyer as an employer and get the buyers contract signed disclosing the commison due to you at closing. Commision is a closing cost just like lenders fees or attorney fees. Niether buyer or seller want to pay these fees so that becomes a negociated amount at contract presentation.
Why Attorneys get paid what they get?
Why Doctors get paid what they get?
For that matter a plumber , electrician, lawn mower etc
I think this is a lead for class action suits on every trade waiting to happen. Attorneys are having a field days