The National Association of Realtors (NAR) is facing a new federal class-action lawsuit that accuses the trade group of violating antitrust laws.
The lawsuit was filed earlier this week in South Carolina and accuses NAR and a listing broker affiliated with Keller Williams that listed properties on one of NAR’s Multiple Listing Services. The lawsuit, which was filed on behalf of all South Carolina residents who used the Keller Williams broker since November 2019, accused NAR of creating non-negotiable commissions that required sellers to pay the commissions on the buyers’ brokers.
“The effect of these rules is not simply that the seller must pay the buyer broker’s compensation,” the lawsuit said. “These rules effectively take the compensation structure out of the view of the buyers and sellers, masking who pays the buyer broker’s compensation. Indeed, a buyer broker may not even present an offer to a seller that is conditional on the seller reducing the buyer broker commission,” the suit states.
The lawsuit mirrors a similar lawsuit from Missouri that ended with a nearly $1.8 billion judgment against NAR; another lawsuit covering the same issues is scheduled to go trial in Illinois in early 2024.
I am an 88-year-old, retired from residential brokerage after 25 years. In the late 1990’s, when there was no internet and cell phones, the total commission was 5% – to be divided 2 1/2 to listed brokerage and 2 1/2 to selling brokerage. Individual Brokers got some of that from the brokerage. The listing Broker got the property ready and communicated the listing to the brokerage community. A major cost to the listing broker, not the brokerage, was the public advertising at 30 cents a line and up. If it took 3 months to sell the property, the broker was in for $30-$40. Houses were selling $150K – $200K. 5% of 150K = $7500 commission to the brokerage. $7500/2 =$3750 each. A broker paid 50% by the brokerage got $1875. If you sold a house a month you made about $20 thousand a year minus the $5000 advertising costs.
Today, no advertising cost, all internet and cell phone. Property sales average $1 million each,
Brokerages get $50,000 for listing and selling one house.
And what about the buyer broker? What do they do? Well, in today’s market with record-low inventory, your buyer frantically calls because a listing that meets some of their criteria has finally hit the market. You have to act fast because the listing has been on the market for several hours now! The agent calls/uses an app to make an appointment. All the spots my buyer can make it to are not available because they are all filled up with other buyers wanting to see the same house. By now the listing agent has set a deadline of tonight at 8 PM to get your offer in. If you get to show the listing before the deadline you find 2, 3…5, or more other agents showing the property. If you get your offer in by the deadline and then you text the listing agent to make sure they received your offer and you ask in the text; how many offers have they received? The answer comes back 18 offers. Do you think the offer I sent was accepted? For every buyer an agent has this scenario will happen a minimum of 2 or 3 times. I have had it happen more than a dozen times with more than two dozen buyers! Showing one house and making one offer at a time;)
No dog in this fight but whether you pay 1/2 to sell and 1/2 to buy within two transactions seems irrelevant.
First time homebuyers already need assistance with Down payment and closing costs. This will just increase the divide. Lower income and minority households will be disproportionately affected by this further widening the gap in accumulating wealth and homeownership.
I have been a Realtor for 45 years and have seen so many changes thru the years. When I started there will not buyer brokerage and then in the late 90`s buyer brokerage started. We never had home inspections and all other inspections. Now it seems everything is slanted toward the buyers and the sellers are taking the blunt.
So now we are seeing lawsuits rising. How interesting! What will the future be in commissions and representation?
I’m not sure how you think we have no advertising fees now that we have the internet! I pay $350 for a website, $250-350 for a professional photographer for every listing, $300/month for SEO (search engine optimization since you probably have never heard of that) so my website will be found by someone, ads on Facebook, Instagram and etc also cost per ad, those are all prior to selling the property. And let’s not forget all the fees we pay to our brokers, NAR, and each MLS we choose to join, those MLS dues alone are in excess of $3000/year, and my broker gets a nice chunk out of each sale for doing nothing, not even promoting their agents!
There is definitely cost to market property today. Believe it or not the internet is not free. And many other marketing venues that are also not free then there were years ago. In fact the cost of marketing alone far exceeds what it was in the 90’s. And the average sale price in my market is not a million dollars. It’s more like 250-300k.
How is it that what a broker and seller agree to on a written contract which states on that contract how much the seller agrees to pay the broker prior to listing the home is in violation of anti-trust? It is all negotiable. Therefore, the attorneys in these cases are all in violation of anti-trust laws with the difference being anywhere from 3 to 7% for a professional service compared to an attorneys professional fee of 35% to 55%. The “class action lawsuit” benefits no one but the attorneys. I honestly do not understand how NAR cannot protect Realtors and the public from these vultures. The public is basically who will be violated the most. And we as members of NAR are ethically bound to protect the public.
I completely agree with you!!! This is a money grab from the lawyers! And EVERY listing is negotiable!
As a realtor I’ve been know to show a buyer over 50 houses before they decide to make an offer, sometimes that buyer may have made offers on several homes. Each offer takes time to pull information from various sources, compile into an offer and send to the listing agent. Once accepted we start the inspection process, again visiting the property with inspectors, and possibly subsequent visits with contractors. This doesn’t include the properties I’m asked to research before we go look, reviewing disclosures, looking at roof ages, running comparable sales.
Every client I work with on the buy side is a journey, budgets can change, areas can change – I have one client that had to be in a particular zip code, only a few weeks later to find a house she loved 45 minutes away. We used my car to drive to the property several times before closing.
I simply couldn’t afford to be a buyers agent if I didn’t get paid at closing from the seller proceeds. Have the buyer pay I hear you say, just looking at final statements for buyers can be horrendous – inspection fees, appraisal fees, abstracting, title search, title insurance, loan origination fees, escrow deposits, and that’s before thinking about a deposit amount of maybe 5-20% of the home value.
On the sell side, I find that probably 90% of my clients are happy to pay the commission to facilitate the deal going through. I’m a post 2009 realtor so have never had a seller that lost money on a sale. Sometimes its a move, other times it may be a death in the family and an inherited property. Buyers realtors work their butts off looking for a suitable property for a client, sometimes the clients not even at a showing, I’ve worked with out of state buyers and done video walkthroughs.
Commissions, as Keller Williams informed me when I started working with them, are negotiable. Its up to the individual realtor what they charge. On a lesser value house I wouldn’t lower my rate, on something more expensive, your damn right I’m going to try and be competitive and maybe knock off a percentage point, or even two.
Taking away buyers agent commissions would be a terrible ideas for sellers, and the industry as a whole. Buyers need an advocate and sellers need buyers .
Well said!!!
Who is making the down payment and paying the mortgage? It’s the buyer!! Who is making a profit because they are receiving more than their basis in a property? It’s the seller. This whole issue is being taken out of context with the real world of real estate. The buyer is paying for all of this. These seller-plaintiffs are whining about wanting more money and their attorneys have pushed this to a class-action suit so they can suck in a snoot-full of money. A “singular” lawsuit for one client just isn’t big enough. And the sellers really are not dedicated to “saving the world”. I am a retired CPA (after 30 years) and have 25 years in as a broker. A system that has worked for years, is equitable to both sides, and is being driven by greed is on the verge of being be broken.
I have been in real estate for 30 years. Back then, when we had buyers, we were cooperating sub-agents to the seller. Even though we brought the buyer to the transaction, we disclosed our relationship as sub-agents to the seller because the seller was paying the commission. The buyers acknowledged this relationship through an Agency Disclosure. Our fiduciary responsibility was to the seller, while we provided a professional relationship to the buyer. We disclosed what we were provided from the listing, and we guided buyers based on our expected knowledge in the field. Real estate agents were more professional, honest, and career-minded back then. When buyer’s agency became the buzz, it wasn’t because the seller was dissatisfied with the system or the representation they were receiving. It was because the corporate franchises saw the opportunity to lock these “roaming buyers” into a contract. They never even considered the fact that the seller would be pissed off that we now provided the same fiduciary representation to a client who brought no consideration to the table. and don’t tell me that the price of the house was consideration! Nonsense! It was wrong and now we are at the mercy of lawyers and judges.
Unfortunately as in any other profitable business, lawyers got involved and saw there was big money to be made and they are after their cut. The system works and has worked for years. It is set up to benefit everyone involved. It is fair and if done properly makes the whole process run smooth from buyer agency to closing. So don’t be fooled to think there is some noble motive in all of this because that is what they want you to think.It is all about greed!
The answer is simple enough to just go back to SA’s (sub agencies). Each agency should explain Agency Relationship with every Seller. If a Seller prefers to have a portion of the commission compensate another agency (BA, TB,TA or SA’s) then there no violation.
I have had Buyers compensate my agency in order to offer less than the list price in order to lessen the tax assessment.
All written contractual agreements are between 2 parties with mutually agreeing to price, terms and conditions…sorta like a Seller and Buyer does
Sad to see our business fall into the same category of a Camp Lugune, Round Up, Johnson Baby Powder class action of lawsuit filings.