As the National Association of Realtors (NAR) is in the legal spotlight with an ongoing class-action lawsuit in Kansas City, the U.S. Department of Justice (DOJ) is reportedly preparing to pursue a federal antitrust suit despite being under a court order to abide by a settlement with the trade group.
Bloomberg, citing an unnamed “person familiar with the issue,” reported the DOJ is taking aim at NAR’s commission-sharing system that requires home sellers to cover up to 6% of a sale, with the funds split between their agent and the buyer’s agent. The practice is at the center of the current trial and will be raised in a separate class-action lawsuit scheduled for Illinois in early 2024.
The DOJ began investigating NAR’s practices during the Trump administration, but reached an agreement in November 2020 with NAR that resolved the department’s concerns. When the Biden administration came into office in 2021, the DOJ tried to pull out of the settlement agreement.
“The proposed settlement will not sufficiently protect the Antitrust Division’s ability to pursue future claims against NAR,” said then-Acting Assistant Attorney General Richard A. Powers of the DOJ’s Antitrust Division when the department made its plans known in July 2021. “Real estate is central to the American economy and consumers pay billions of dollars in real estate commissions every year. We cannot be bound by a settlement that prevents our ability to protect competition in a market that profoundly affects Americans’ financial well-being.”
However, last January, a federal judge ruled the department was still bound by the agreement. NAR General Counsel Katie Johnson acknowledged the court’s ruling “does not preclude the DOJ from investigating NAR in the future, and the DOJ has the option to appeal this decision if desired.”
The DOJ appealed that decision in June with a filing in the U.S. Court of Appeals for the D.C. Circuit that claimed the lower court issued an “extraordinary” decision blocking a subpoena for information from NAR that disrupted a “consequential investigation of conduct that affects over $100 billion in broker fees paid by Americans annually.”
Update: In a statement to WRE News, a NAR spokesperson said: “We reached a settlement agreement with the DOJ nearly two years ago. NAR has upheld our end of the agreement, and we expect the DOJ to do the same as affirmed by a federal court’s careful ruling. This is a completely separate matter from the trial of Burnett v. NAR et al.”
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Why try to fix what’s not broken?? Buyers are paying enough as it is, between down payments and closing costs, it can be very expensive. For years, the sellers have had no issue knowing that when their house is listed at the agreed upon commission rate, that the buyers agent WILL be getting a commission from that. That not only helps you expand your
Buyers pool as well!! Stop messing with this!!!
I’ve been a Broker for almost seven years. Commissions have always been negotiable. We never discuss commissions between competing Brokers, ever. NAR NMAR and our MLS have clear policies agains discussion of, or setting commissions. We are Al independent contractors and any policy to set commissions would regulate how we do business.
In the 1980’s (and up to that point), every agent represented the seller. Buyers were unrepresented. Caveat Emptor (Buyer Beware) was the norm. Later, agency laws were changed and agents were permitted to represent buyers. If laws change which prohibit the seller from paying the buyer’s agent, then most buyers will be back to no representation. Many struggle to save a downpayment; often have to request the seller pay their closing costs; and would not be able to pay out of pocket for representation. Buyers bring the money to the table. The price they pay is intended to cover both sides of the commission. If both agents/firms are not paid from seller proceeds, then buyers should pay less. However, if they cannot afford to pay for an agent, they lose the ability to be represented. How is that fair to buyers? Do only the wealthy deserve to be represented? I think not. Sincerely hoping the Judge and Jurors put themselves in the Buyer’s shoes when making their decision. If a wealthy Buyer makes an offer at a price that excludes their agent’s commission and agrees to pay their agent/firm directly, that is not a problem. However, that should not be legally required.
Furthermore, commissions have always been negotiable. To say that all commissions are 6% is untrue. Even within our firm, our commissions vary greatly depending on the type of property, how easy it is to show (a home vs. walking 200 acres, for example), how saleable the property is (will it require extensive marketing time vs. selling in one day), etc. Many factors determine the commission we quote; and, yes, we do set minimums for our office. To sell a $10,000 piece of property requires the same process (and oftentimes, even more work) as a $100,000 or $1,000,000 property. Why should up to two firms with two or more agents involved be expected to split $200, $300, $400, $500, $600, $700 or any other amount based on a percentage for days, months, or even years of work. We set our minimums for our firm. Other Brokers set their minimums for their firms. Have we ever reduced those amounts to help our clients? Absolutely. That should be our right, not our legal obligation.
I am 90. I am still happily working with buyers and sellers. Do you really think a broker would hire me and pay me a salary to work for them at my age. This is a business that has allowed seniors to continue working and providing an income from for themselves. I’m of the school if it’s not broke don’t fix it
John is correct. Real estate 101 – commissions are not fixed. There are any number of brokerages that work for amounts other than 6%. This smells like another instance of the DOJ going out of its way to look for something that isn’t there.
I agree with John. I’ve been an agent for 13 years in two states. NAR does not DICTATE what the commission is or how much is paid to a buyers agent. We can choose to not pay any. While I am clear with my listing clients, I’m sure some agents out there don’t actually communicate to their clients how the commission is shared. It’s not forced or coerced.
I am retired now 4 years but was a independent real estate broker for 40 years. I attained the professional designations CRB & CRS plus a BSBA. If NAR had a policy stating that NAR’s commission-sharing system that requires home sellers to cover up to 6% of a sale, with the funds split between their agent and the buyer’s agent? I never heard of it. I ran my agency the same as most of the other agencies in my local market. Once buyer representation was introduced, we never signed a sales agreement with out a signed buyers representation form included. All our buyers were represented by my agency. My agency decided the commission rates by negotiation with the buyers in the case of the sale. If I wanted to offer less in commission I did. If I need more I did do that as well. I never considered the commission that was offered by the seller as a split. If the split conformed with what I felt fair considering the type of property, location, condition, and price and the buyer agreed? I would go with it. In a few situations I required more that the listing agency’s split. We worked it out. The seller paying the buyers closing costs and commission was a function of conserving up front cash the buyer had to produce at settlement to make the deal work. The government had strict limits on how much money the buyer had to have in the deal which we had to honor regardless of what label we put on it. When interest rates were high we used second mortgages to make up for the down payments needed. It was All perfectly legal. I do not believe that NAR can dictate anything regarding commissions or splits. In my professional career, I never let that happen policy or not. What the DOJ is doing now is irrelevant. All you real estate brokers should run your agency’s legally as you see it. Tampering with commissions is one of the biggest no no’s in the industry. Do not let some NAR policy for you to even come close to breaking federal laws. Let the lawyers strive to justify their salaries. Real estate brokers run this industry one listing and one sale at a time. We will always do what is right for the people we serve. The consumer!
Well said. Been in this business since 1996.
How has NAR represented us, the agent on the street? They have already agreed to put the buyer commission down to a Penny on the MLS to cover their you know what. I believe if this passes, individual agents will be gone. Who wants to work for nothing . Big companies will take over with less personal attention to buyer and seller. You will sign a contract with them to sell with every service you want being an extra charge. Buyers, sellers and agents ( who are just trying to make a living) will all loose out to big business.
The commission is usually taken out of the offer price at closing. So the seller knows and the sellers agent knows to set the price with the commission in mind. (And I always let my seller know how that commission is being set up and who it goes to.) So, in reality the seller is paying his part and the buyer is paying his. It’s just in how you look at it and how it’s written up.
the advent of buyer brokersage showed that the seller has a commodity. the buyer brings the pile of money to buy the commodity. then it gets divied up between lenders, attorneys, title companies, realtors, repair issues, municipal liens, fees, taxes ,water , sewer,.association fees, arrears etc.
ask the plaintiff how much they invested into the MLS systems through dues , exsperience and fees in order to develope the technoloy. The systems we paid for ddirectly benefitted both buyers and sellers. Prior to the technolgy , individual brokers each held these pocket listings.Now tthey want to share and use the dinner but never shared in bringing any of the food or help in the preparation , as if the MLS systems magically appared.
I very rarely knew what other brokers were charging. I would sometimes find out from the sellers, when they were comparing services for fees.
Many buyers mistakenly believe that a buyer’s representative comes at no cost to them. However, during a property’s closing process, funds are allocated to various parties, including the state, brokers, and insurance. Both the buyer and seller contribute to this pool. Although the seller negotiates the broker’s fee and the final property price is settled between the buyer and seller, one could argue that both parties indirectly pay the broker’s fees. If buyers were to directly pay a portion of the broker’s fee, the overall amount they pay might remain unchanged; they’d just distribute it differently.
The current setup, where the seller often foots the buyer’s broker’s fee and compensates by adjusting the property price, allows the broker’s fee to be included in the mortgage. This benefits many buyers who struggle even with a 3% down payment.
Potential legal challenges could disrupt this setup. This might require buyers to pay double the upfront cash, as mortgage companies typically only include the buyer’s broker’s fee in the financing when it’s paid by the seller. The repercussions could be significant. It could push homeownership further out of reach, especially for first-time buyers, or force buyers to navigate the complex purchase without expert guidance. As sellers will always have their representation, buyers would face tough choices: 1) Save double the upfront amount, 2) Negotiate independently against experienced professionals, or 3) Forego purchasing a home.
I have been a Florida Broker since 1998. What I don’t like is the chain companies that charge an extra $250.00 up to $500.00 written into the contract over and above the commission.
The current process of “sellers paying the commission” is inaccurate. The buyers pay for the commission in the price. Comps include commissions when an appraiser uses a sales comparison approach to value. This is not just about agents. It is affecting appraisers, lenders, AVMs, builders, etc., and it seems it will be more confusing than transparent.
6%? Last listing I closed I charged 4% then I had to reduce that to keep the deal alive lol. I always explain to my sellers that I will charge 4% but 2.25% will go to a buyers agent that will bring a pre-approved buyer that is willing and able to buy. So in essence the seller pays the commission but without a buyer paying a price there is no commission to share. In this system the seller is well represented and the buyer is well represented. Stop trying to fix what is not broken!
There is no set commission rate , there is no set interest rate. There is no specific time to buy or sell a home or business. You make a decision involving these things , therefore like anything in life , Its the consumers choice and decision . Pretty simple .
This regime and it’s DOJ will not be happy until they place restrictions and have control of every industry.
They need to go.
Buyers agents keep the real estate business honest. If you get rid of them then people will be unrepresented. Hello to investors buying even more of everything. They are fussing over 6% commission when the average attorney gets at least 30%. They should be the last ones complaining. Buyers agents make it less easier for random people to get into sellers’ homes because they open the door for the client so the client is vested. Vacant owners wont have to worry so much about squatters. They bring the buyers. And the buyers get to see what a seller offers on the mls, so they get to choose. The money comes from the buyer anyway.
This settlement was reached in 2020 under the Trump administration. The proposed solution ha smore to do with political grandstanding and in the end will hurt the buyers market, especially for first time homeowners.
Imo, when the listing agent earns their commission, the agent has a right to distribute to the buyer’s agent as they see fit. The seller already knows what they are paying when they sign the listing agreement. So, since the seller knows what they are already paying, why worry about the split? Smh
The easiest way for me to explain this is that the Real Estate market is going to end up like our broken justice system. The people with money who can afford to hire a lawyer and Real Estate agent is going to the get upper hand and the buyers and sellers who can not afford those services are going to end up possibly being screwed. There is a lot more to Real Estate then the average person thinks about. The way the system was set up it protected both sides without having to pay anything upfront and each side could use and hire whomever they wanted. I hope people know what is at stake because the only one that is going to win is going to be the people with the money! Instead of making it fair on both sides.
So now you know how to set up a campaign, let’s look att some of the otherr things we can do.
The fatal mistake being made is, most houses are financed up to 100% (VA Loan) and others from 80% to 95% loan to value. How do you think the buyers are going to fare putting down and additional 3% in closing cost to pay the Buyer’s broker? All that will be done is to impede the ease of transfer of property and close the door on more buyers. BTW I’m a retired broker of 50 years and think when buyers brokers came along the sellers were the loser in most cases. That being said both buyer brokers and seller brokers have different and distinct rolls to play and it is their advocacy that pushes the sale to a close. This will be like ‘defunding the police’.
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