The U.S. Department of Justice (DOJ) has launched a “formal inquiry” into the California Association of Realtors (CAR) in response to a consumer group’s complaint about the organization’s contracts and forms.
According to the Orange County Register, the Consumer Federation of America (CFA) issued 19-page critiques of two new CAR contracts — the “Buyer Representation and Broker Compensation Agreement” and the “Residential Listing Agreement.” The consumer group alleged CAR’s 2024 documents “anti-consumer provisions,” including a new buyer-agent representation agreement that was criticized for being “too disorganized and complex for the average homebuyer to understand.”
The exact focus of the DOJ’s inquiry is unclear. Neither CAR nor the DOJ commented on the news report.
The 200,000-member CAR issued an online statement arguing the CFA offered a “misguided critique” of draft documents “that was still a work in progress.” CAR has been updating and revising dozens of its forms and contracts ahead of the National Association of Realtors’ (NAR) commission settlement which is slated to go into effect on Aug. 17.
“The (Consumer Federation) report contains wild speculations that brokers using CAR forms will try to get around the NAR settlement. CAR supports the goals of the settlement,” the association’s statement said. “The report also says that the draft form has too much information about what sellers can expect regarding marketing their home. Instead, we think information about the MLS and the offer process helps educate the seller and makes the form more consumer friendly.”
The “cost to move”, for a “same price house”, has gotten absurd and clients notice that (Per recent closing costs worksheets for buy and sell for a $800k house, with state sales taxes, Realtor commissions, Title Insurance for lender, seller and buyer at $3800 each or $12k for all three – why three??, 1% loan origination fee and other loan charges, survey, appraisal, etc., etc., etc. it can cost $70k to move from either Tampa/Miami to Orlando. Clients won’t/can’t budge without a Relo package, and companies are tired of high $ Relo packages. Clients and companies consider that $70k as $ thrown to the wind. 6% Commissions are the most of it at $48k. Housing prices nearly doubled and our commission $ with that. What was $24k is now $48k. Realtor Commissions are a contributing cause to the current frozen market.
Then physical moving costs (moving truck, movers, packing, etc.).
Furthermore – IF you need a bridge loan to cover the period where the old house is being sold to get your equity $ – the bridge loan usually charges 1% of the loan amount besides the higher interest rate for the short period between closings.
With a bridge loan – you might hit $80k total moving expense – 10% of the house market value – all $ thrown to the wind.
Then consider any capital gains taxes you owe for gains over $250k/person.
To pay $70k-$80k, you need to earn more than $100k to pay Federal, Social Security/Medicare and any State or local taxes.
Just to move…
All aside from a likely higher mortgage interest rates, higher property taxes due to the new house’s selling price, house insurance, etc. All aside from the new house’s potential higher price.
Don’t think anybody would take issue with the numbers here; the characterization of those numbers maybe, but not the numbers. First, let us note that an awful lot of of those numbers revolve around taxes. That has nothing to do with all of the vendors you cite, including Realtors, and everything to do with government. Second, what do you expect all those service providers to do? Not get paid to provide those services? And why do we need all (or at least many) of those sevices? Prior lawsuits, lawsuits like this one. The end result of this lawsuit will be more forms, more confusion, (and indeed this complaint actualy cites that as part of it’s purpose), and likely the need for yet another service to protect everybody. Third, how often do Realtors charge/get “full” commission these days? 2-2.5% or less (per listing and selling, so 4-5% total) is more normal now, so the market has been driving commissions down all by itself, all without lawsuits and government inserting themselves into it. And here’s the real issue, the general public think commissions are too high and that Realtors are overpaid. They think this for two reasons; one, all they see is the gross commission paid and think the Realtor gets 100% of that to spend as they wish. They don’t see the expenses the Realtor pays. They don’t think about the taxes that the Realtor has to pay (comparing their paycheck that already have taxes taken out), the fact that the Realtor has no vacation, sick or hospital days, no medical, no retirement, no unemployment insurance, etc., all of which comes out of that commission. Second, the general public is kept insulated from the real work a Realtor does; most people think a Realtor just “shows houses” and gets paid a huge commission. Finally, the real long term goal of this suit, and the many that will follow, is to ultimately force Realtors to become hourly or salaried employees; that’s what the leftists really want, and it will benefit no one except the government.
George, you do well to point out the costs. It’s an irritating reality that, under the mantra of helping the consumer, costs wind up rising, often via regulation. Dodd-Frank is a good example. As an appraiser, I noticed costs went up after that law passed. Dodd & Frank were Congressional committee chairmen, in many ways responsible for the mortgage meltdown. They later cast themselves as saviors. In the end consumers pay more.
David Campbell, spot on with all points!
Thank you for this well written article with So Many solid points… But the one thing that ALL news (written and streamed) has Failed to make clear to the public is that the Realtor does NOT get the full commission~
If two franchises are involved, that total commission is unevenly split 6 TIMES (3 times per side of List/Sell) and if the property is Listed and Sold within the same franchise, it’s unevenly split 4 TIMES… I Always clearly explain this to my sellers when I am listing a home…
The media paints a picture that Realtors are walking away from a closing with 6% commission in their pockets… and there is simply NO Truth in that!!!
Commission checks are written BY the closing company TO the Listing and Selling BROKERAGES… these brokerages must then pay National franchise fee, Local franchise % and THEN the agreed upon local Realtor’s %…
QUITE DIFFERENT from what’s being portrayed by the media!!!
DOJ and ALL Media covering this NAR settlement and other related real estate stories need to start reporting “The REST of the STORY” as Paul Harvey use to say!!!
It’s time to start presenting TRUE FACTS to the public… and it’s up to US REALTORS to make sure that happens!
Thank you David for your great reply. Unfortunately it goes on def ears. Maybe we should all leave the NAR and start something new.
Yes I agree. Let’s stay with the State and a Local board…that is all we need.
Perfect, NAR sold all us Realtors out maybe we should all leave NAR.
Curious why nobody talks about the cost to the seller for buyer needed concessions? What does that look like per sale?
I’m also curious if most real estate agents understand why those concessions are being requested? Many times the amount of concessions is driven by the need for the loan officer to protect their commission. There is a direct correlation between the loan officer’s commission in the broker space and margin to cover operational expense in the mortgage banking space. The higher the compensation in the broker space and margin in the banking the further away a broker or banker will be from offering a competitive interest rate. Hence, why you see massive concessions coming with offers. Beyond the real estate agents commission of 4.00-4.5% you may see another 3-6% in concessions expected to be paid for by the seller. Keep in mind, haven’t added any ancillary seller expense. Last, not sure why real estate agents don’r file a class action suit against NAR for syndicating MLS data. You all pay dues, you all had a captive audience and yet they syndicated to Zillow and other companies. The same companies that will certainly cause disruption and benefit the most from these changes.
WORD!
Keep in mind that those Relo companies are charging the listing office a fee of 40-45% of their gross fee collected. There are others that cap the amount the listing agent can collect at 1% or 1.5%, but then they also collect a few fees from the Listing Office. Technology fees. Administrative fees. They require a ton more paperwork including weekly BPOs on the property. Weekly inspections including two pictures of each room from 2 different angles. The LA is sometimes required to find someone and front the money to maintain an empty house. Referral fees from a lot of the online lenders for Buyers have increased as well to 40% or more. I actually told one I would no longer work with them if I wasn’t able to negotiate a different fee based on the price point and location of the home search.
Maybe the DOJ shouldn’t have stuck their noses into agent commissions to begin with.
Agree!
DOJ nailed it! Everyone work for free!! Afterall, agents don’t deserve to be paid. Maybe they will go after electricians next. Or plumbers, or contractors. 1/2 pay for everyone!! This is the new Biden world!
The DOJ started its last round of investigations in 2018. So… how do you figure Biden was directing it a couple years before he took office?
Well said. Especially who benefits from this: Governments and regulators.
Some people just can’t read the letters and words on the contracts and then complain about everything.
Exactly!
I agree with the prior comment. Commissions have always been negotiable. As an agent, my commission (for both selling agent and buyer’s agent) ranged from 3% to 6%.
It’s now apparent these lawsuits are nothing more than an attempt to force Buyer Agents to work for free.
Did you ever think that with the sellers only paying one side of the commission on a sale, the listed price could now be LOWER. It all works out!!
The buyer is not paying more.
Commissions have always been negotiable.
The Commissions are Paid out of the Seller’s proceeds. Not the Buyers.
(This obviously will change with the lawsuit-regulations)
The Seller wants to obtain the highest and/or best value (offer) for their home and/or property.
It has nothing to do with the Buyer.
Thinking the Seller is going to Sell their home/property for a lower price because their expenses are lower is not reality or realistic.
Unfortunately, this ruling will make purchasing a home more expensive for Buyer’s.
What’s next?
Is the Seller going to be “forced” to drop the price of their home because the Buyer or government says so?
The Seller will do what’s best for the Seller.
The Buyer has the ability to try and purchase any home/property that’s available.
If both parties (Seller/Buyer) agree to the terms, then you have a contract.
That’s great!
There’s several issues with housing, the biggest being the supply or lack thereof.
Get the best and brightest of the Industry and have them help lawmakers draft the best policies and/or improvements moving forward.
Unfortunately, having people craft rules and/or regulations outside of any specific industry will more than likely have negative impacts.
I guess none of you understands inflation. Saying the system that was in place was fine but all the sudden now isn’t fine when nothings changed is not a concept you grasp. I’ll help you. It’s called inflation. Your money isn’t worth anything, that’s the problem. Not your realtor or anyone in the ecosystem that deserves to be paid. The fed needs to stop borrowing and printing money they don’t have that we pay for to run the country. There I fixed it for you.
This entire lawsuit is a joke! Commissions have always been negotiable and still will be. You get what you pay for with any service industry! You will see a major uptick in lawsuits and now it is far less transparent to the public and industry of what amount of compensation is being offered if any to a buyer’s side of the transaction. High Prices -high interest rates – buyer’s paying their representation fees – Affordability is already a challenge for buyer’s so let’s add another cost! LMAO!
Have you all thought that, maybe if the big companies and NAR had not broken the law, and were so greedy we would not be in this situation now??? Everything was fine, especially out West. The company we pay our dues to, and the one that takes our split screws us over and does not look out for our best interests and practices?? Anything else is BS..
The DOJ continues to strong arm our freedom and entrepreneurship and price fix what hard working Realtors should make. The housing market is frozen due to INFLATION & INTEREST RATES. Not our fees this is one more attempt to push us all into socialism and a fixed incomes. No more American Dream This administration is Ruthless…..
Well hell at this point I’d love even a fixed income if it arrived without fail and with a minimum-to-reasonable amount of effort. (We have the worst of socialism and the worst of capitalism.) What these “adjustments” do is make it even harder and more precarious to make ANY $ and only the super-patient, energetic and motivated will put up with these calibrations very well. We already work hard, and working harder for less should be a non-starter for regular people. Those at the top will be fine, as always, but I still fail to see how consumers are benefiting from yet more esoteric forms and commitments. It feels like a weeding-out, barrier to entry, punitive thing…making it even harder than it has to be….and it IS a racket when you figure out the costs to purchase/sell/move! But our share was ALWAYS negotiable.
No one seems to comprehend the hours spent with folks who decide no5 to purchase; the time and effort ( at least in my biz model) to get from prospect to buyer or seller to closing. I assume the DOJ people get paid hourly whether they “ achieve” anything.. and the class action lawyers make 30% plus expenses. All this to drive down independent contractors net? And commissions have ALWAYS BEEN NEGOTIABLE. At least in my part of florida.
The NAR deal is not 100% done yet. We need to fight against this very socialist agenda. Biden is already trying to control rents. Every realtor and person/company that benefits from Realtors needs to contact their state representatives and let them know this very quickly “resolved” class action lawsuit was settled prior to the November election for a reason. The news media is purposely not promoting what realtors actually do and how much time we spend working, and the splits we have, and the fact we don’t have insurance, retirement ect. There was more positive news on McDonald’s employees being underpaid. Realtors let’s make some noise now!
Cindy I agree! The general public does not realize all of the work that real estate agents do and at times, do not even get paid for when a client decides, after possible months of work, that they changed their mind. Do they know we pay up to $500 for professional pictures? We pay extra car insurance? High MLS dues, gas and high mileage on our cars, etc? I have represented buyers in new construction, which many people don’t realize the value of their own agent, and saved the closing by being on the phone literally 8 hours straight by taking the issue all of the way to the top. There are no vacations without phones. Heck I was hospitalized for 7 days with heart issues and my clients did not even know I was in the hospital…. because I AM A REALTOR!
Or when a deal is falling apart…. ” well let’s lower the percentage for the Realtor!” Would any other profession put up with that? I think not!
I am a REALTOR, whats next to be disclosed up from and to be signed attorney fees, yacht sales, car sales, appliance sales your financial planner and so much more what just the Realtors?
Harry Snyder on July 21, 2024. Lets go after Lawyers fees, Doctors and dentists fees and every other professional in the game. They all need a 50 % reduction in their fees and politicians need to work for free and no contributions from bribery experts. And then
start fees from folks like Jim Ashton above advocates.
I happen to teach the 63 Hour Florida Real Estate Pre-Licensing course. 60 Class Hours and a 3 Hour final exam. This course, if passed, allows you to take the Sales Associate License Exam, typically conducted at a formal NCS Pearson testing location. If you pass, you are awarded your License. Then you need two years of working under the purview of a Licensed Real Estate Broker which then gives you the ability to take the final 45 Hour Post Licensing Course and final exam. If you pass, you become a “gun for hire” and can easily move between Brokerages. You can even take the Brokers Licensing Course and if successful, you can start your own Brokerage. Pass rates vary for all these exams, but the failure rate along with drop out rate at the various levels usually results in less than half of the candidates making it through their first two to three years. The “one half” fraction is relevant for another reason – that percentage represents the approximate amount of their assigned commission a licensee will actually realize at the conclusion of a successful transaction. Oh, and by the way, virtually all licensees face a certain number failed transactions, some as late as at closing and many after spending dozens of hours and even thousands of dollars in expenses. Add in the costs of supplemental education and certifications, dues for memberships in the NAR and numerous MLS and Regional Realty Associations, supplemental memberships in Real Estate compiling sites like Zillow and Realtor.com and virtually limitless avenues for costly marketing and promotion, and purchasing customer leads – etc., etc. I often wonder where the misguided notion of Real Estate being such a easy way to make money came from. And now we have seen the NAR and some misguided government and legal officials literally throw hard working committed Real Estate professionals under the bus. Sorry about the diatribe, but someone needed to say it.
Well said everyone, don’t forget your social security tax is twice that of most people. For people who are employees, their company pays the other half!
I agree it is time for the industry to be run by The State Associations not the NAR. The NAR sold it members out when they sold Realtor.Com years ago, allowing access to the listings we as agents worked hard, spent time and marketing dollars to obtain. The loss of control for that listing information has lead to third party companies selling us back for a fee the leads on our listings. We have a 6 figure annual marketing budget to obtain and sell our listings, years ago we saw a much greater return on our investment, not so today. The second NAR anti-agent mistake which became the current lawsuit was their Clear Cooperation Policy. If we were not forced to accept that Policy there most likely would not have been a lawsuit. The Real Estate business would have continued as it had for the past 100 years.