Sand
Footballguy
Dumb question - if I went in to one of these situations and offered the dual agent 3.5% to complete (or something very low) would they go for it, in general? Getting all 6% is absurd in this kind of situation.
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Jury Finds Realtors Conspired to Keep Commissions High (2 Viewers)
- Thread starter Stoneworker
- Start date
FreeBaGeL
Footballguy
Isn't this true of a lot of commission based things though? Is being a server at Ruth's Chris 4x more work than being a server at Applebees? Or even within the same restaurant, is dropping off 2 steaks and 2 mixed drinks triple the work of dropping off 2 salads and 2 cokes?
Sand
Footballguy
Zegras11
Footballguy
Yes, most good agents will lower the listing 3% by 1 or 2% to save the sellers money, especially if they are getting buy side on new home purchase.
ghostguy123
Footballguy
And how many realtors are doing this right now given the tiny amount of overall transactions?
Stoneworker
Footballguy
Primarily the dollar magnitude of the commission. Paying $60 in tips vs. $15 is hardly a cash outlay that anyone cares to spend time doing a cost accounting audit. But an extra $30K? That's worth the time to figure out what value was created to justify it.
It's the same reason fixed asset management fees in the financial/investment industry (e.g. 1% of portfolio value) are a sketchy fee structure.
Lastly, with a high-end restaurant server tip we are also indirectly paying for a higher-quality product provided by the restaurant itself (i.e. good service enhances the food consumption experience). With a house sale, the seller provides the entire product. Brokers have absolutely nothing to do with whether that house is worth $1mm vs $500K.
Chadstroma
Footballguy
The commission is negotiable in reality. The big idea behind these lawsuits is that the brokerages conspired to essentially make them not negotiable. I don't think there was ever a real conspiracy but common interest aligning, normal business practices and typical positions of brokers to their agents of 'know your worth' and then you have a lot of the transactions keep at that 'standard' 6%.
Stoneworker
Footballguy
Well said
Chadstroma
Footballguy
Court approves Anywhere, RE/MAX commission lawsuit settlements.
(HousingWire by Brooklee Han). Judge Stephen Bough granted preliminary approval of RE/MAX's and Anywhere's commission lawsuit settlement agreements. RE/MAX and Anywhere Real Estate can breathe a sigh of relief. The two corporate brokerages have received preliminary approval of their settlement agreements in the Sitzer/Burnett, Moehrl and Nosalek commission lawsuits. Judge Stephen Bough, who oversaw the Sitzer/Burnett trial last month in Missouri's Western District, granted the settlements preliminary approval Monday morning.
"The Court finds that the proposed Settlements with Anywhere and RE/MAX, as set forth in the Settlement Agreements, are fair, reasonable and adequate," Bough wrote in his motion granting preliminary approval.
The terms of the settlement agreements require RE/MAX and Anywhere to pay $55 million and $83.5 million, respectively, as well as make policy and practice changes.
Some of these provisions include no longer requiring agents to be members of the National Association of Realtors or following NAR's Code of Ethics or the MLS Handbook. Practice changes outlined in the settlement agreements include that the firms will require or encourage agents to make it clear to clients that commissions are negotiable, that agents will have the freedom to set or negotiate commissions as they see fit, and that agents will not be required to make offers of compensation or accept offers of compensation from cooperating brokers.
"We are pleased with the court's decision to grant preliminary approval of the settlement," Nick Bailey, the president and CEO of RE/MAX, LLC., said in a statement. "This development signifies progress in our ongoing efforts and commitment to a resolution - it's a positive step forward in bringing these cases closer to the finish line."
In an email, a RE/MAX spokesperson also noted that the firm anticipates the final approval of the settlement some time next year.
At Anywhere, CEO and president Ryan Schneider was equally as pleased.
"Our efforts to resolve these claims remove future uncertainty and legal expense for Anywhere, our franchisees, and affiliated agents as, together, we focus on serving home buyers and sellers as they move to what's next," Schneider said in a statement.
According to the order, the parties must contact the court prior to Dec. 22, 2023, to schedule final approval hearing.
While Bough's motion answers one of the questions left by the jury verdict in the Sitzer/Burnett trial, much remains unknown. It is also yet to be seen if the Department of Justice will try to get involved in the Sitzer/Burnett suit as it has already done in the Nosalek lawsuit. Many analysts and observers expect the DOJ to get involved at some point.
With a final ruling not expected until mid-to-late spring 2024, the real estate industry remains in limbo as the copycat lawsuits continue to pile up.
(HousingWire by Brooklee Han). Judge Stephen Bough granted preliminary approval of RE/MAX's and Anywhere's commission lawsuit settlement agreements. RE/MAX and Anywhere Real Estate can breathe a sigh of relief. The two corporate brokerages have received preliminary approval of their settlement agreements in the Sitzer/Burnett, Moehrl and Nosalek commission lawsuits. Judge Stephen Bough, who oversaw the Sitzer/Burnett trial last month in Missouri's Western District, granted the settlements preliminary approval Monday morning.
"The Court finds that the proposed Settlements with Anywhere and RE/MAX, as set forth in the Settlement Agreements, are fair, reasonable and adequate," Bough wrote in his motion granting preliminary approval.
The terms of the settlement agreements require RE/MAX and Anywhere to pay $55 million and $83.5 million, respectively, as well as make policy and practice changes.
Some of these provisions include no longer requiring agents to be members of the National Association of Realtors or following NAR's Code of Ethics or the MLS Handbook. Practice changes outlined in the settlement agreements include that the firms will require or encourage agents to make it clear to clients that commissions are negotiable, that agents will have the freedom to set or negotiate commissions as they see fit, and that agents will not be required to make offers of compensation or accept offers of compensation from cooperating brokers.
"We are pleased with the court's decision to grant preliminary approval of the settlement," Nick Bailey, the president and CEO of RE/MAX, LLC., said in a statement. "This development signifies progress in our ongoing efforts and commitment to a resolution - it's a positive step forward in bringing these cases closer to the finish line."
In an email, a RE/MAX spokesperson also noted that the firm anticipates the final approval of the settlement some time next year.
At Anywhere, CEO and president Ryan Schneider was equally as pleased.
"Our efforts to resolve these claims remove future uncertainty and legal expense for Anywhere, our franchisees, and affiliated agents as, together, we focus on serving home buyers and sellers as they move to what's next," Schneider said in a statement.
According to the order, the parties must contact the court prior to Dec. 22, 2023, to schedule final approval hearing.
While Bough's motion answers one of the questions left by the jury verdict in the Sitzer/Burnett trial, much remains unknown. It is also yet to be seen if the Department of Justice will try to get involved in the Sitzer/Burnett suit as it has already done in the Nosalek lawsuit. Many analysts and observers expect the DOJ to get involved at some point.
With a final ruling not expected until mid-to-late spring 2024, the real estate industry remains in limbo as the copycat lawsuits continue to pile up.
The Z Machine
Footballguy
We have a neighbor/friend that is a realtor and has helped us get viewings of a few homes in the neighborhood over the last 18 months. It's about 1 every 6 months. We didn't make an offer on any of them, but did get multiple viewings on one of them.
She recently told us that based on our needs that she thought we should stay in our current home. I know we're relatively high maintenance... took us looking at over a dozen homes and like a year when we bought our first home in 2014. Anyway, not sure if she just wants to be done with us or if she really thinks in our best interest to stay where we are.
She recently told us that based on our needs that she thought we should stay in our current home. I know we're relatively high maintenance... took us looking at over a dozen homes and like a year when we bought our first home in 2014. Anyway, not sure if she just wants to be done with us or if she really thinks in our best interest to stay where we are.
Chadstroma
Footballguy
Why are real estate commissions 6%? – and why that may be changing
Story by By Anna Bahney, CNNHere’s how paying for a real estate agent to sell your home has long been done: A seller hands a percentage of the sale price to their broker, who then splits it with the broker who brought the buyer.
The commission is typically between 5% and 6%, which is usually tens of thousands of dollars out of the seller’s proceeds. But the seller also factored that cost into what they listed their home for, so indirectly, the buyer is paying the cost, too.
How did that become the standard? And will this process continue?
Changes may soon be on the horizon for real estate commission rates after a Kansas City jury determined – in a $1.8 billion judgement in October – that commissions had been inflated and that brokerages and industry groups conspired to keep them that way. This landmark antitrust court case, along with similar lawsuits like it, could overhaul the standard 6% commission and who pays it.
A shift could allow home buyers and sellers to negotiate not only commission rates with brokers, but also who is responsible for paying them — the buyer or the seller. It’s already happening in New York City, where the fee structure is set to change on January 1.
Many thought the internet would eventually kill the 6% real estate commission. But it has yet to put much of a dent into the share home sellers pay, which is about double the percentage that is paid in other countries, according to a report on commissions from the Brookings Institution. Even as the ranks of stockbrokers and travel agents have dropped in recent years as commissions petered out, the number of real estate agents has grown and their typical commissions are bigger than ever as home prices have risen. That is largely because of the power of the National Association of Realtors, an influential lobbying group that represents 1.5 million real estate agents.
While the NAR is appealing the recent decision and emphasizes that its members’ commissions are always negotiable, there appear to be some emerging cracks in the current way a home is sold.
How real estate commissions work
Home sellers are usually on the hook for their real estate agent’s commission as well as for paying the agent that represents the buyer. Brokers typically split the commission, which, depending on the market, is usually between 5% and 6%.A $500,000 home sale with a 6% commission means the seller pays their broker $30,000 upon settlement, which that agent splits with the buyer’s broker, so each side earns $15,000 on the sale. (There is an additional split on each side with the participating brokers sharing their cuts with the agents who inked the deal, so an agent’s actual pay is less than their side’s share of the the total commission.)
Real estate agents will tell you commissions are negotiable — and they are. And there are other models to sell a home including using flat-fee or discount brokers. But there are strong structural forces at play in the industry that keep many sellers from offering less than the typical 6%. Agents’ compensation is included when the home is listed on a regional database known as a multiple listing service, or MLS. Some MLSs will not allow a seller’s agent to list a property that offers nothing to the buyer’s agent.
Sellers may worry agents will “steer” them away from a home that will earn the agent less. And that fear is not unfounded.
A recent academic study of properties listed on Redfin found that agents who offered commissions that were less than the market rate for an area had less traffic and took much longer to sell.
“The people who are most hurt by this are sellers who offer going-rate commissions because they are worried about steering,” said Jordan Barry, a professor of law and taxation at the University of Southern California, and a co-author of the study. “For most homeowners, their house is by far their largest asset. Giving up 6% of the sale price in commissions is a real burden.”
A historic practice
The shared commission structure was set up in 1913 and appeared in the first Code of Ethics of the National Association of Real Estate Exchanges, which had been established five years earlier and later became the NAR.A section of the code, entitled “Duties to Other Brokers,” stipulated that an agent should “always be ready and willing to divide the regular commission equally with any member of the Association who can produce a buyer for any client.”
The NAR’s current Code of Ethics (Article 3) allows commission sharing but does not require it.
Until the Supreme Court put a stop to it in 1950, commission rates were set in a schedule by regional boards of realtors. Boards specifically forbade undercutting the prevailing rate, which was climbing.
In the 1920s in the Boston area, for example, the typical commission rate was 2.5%, but by the 1940s it had reached 5%, according to a study published in November 2015.
Agents argued the commission rate was fair because they held access to the listings unavailable to the public on the MLS. Agents put their listings in the MLS databases where only other agents could see them. These databases were — and sometimes still are — managed by NAR member organizations.
In an update to members following the recent verdict, NAR said the possibility of commission sharing has “always has been in place to protect and serve the best interests of consumers, support market-driven pricing and advance business competition.”
to be continued...
Chadstroma
Footballguy
....continued from above......
Broadening access to the MLS would later allow online property listing behemoths like Zillow and Redfin to flourish. But as the internet became a critical part of home shopping, the commission rate stayed constant even while home prices surged.
The median priced home in 1950 was $7,354 (about $93,000 adjusted for inflation), according to the US Census, making a 6% commission $441 (about $5,500 in 2023). By 2000, the median home price was $119,600 (about $215,000 in 2023), allowing agents to split a fee of $7,176 (about $12,800 in 2023.) In October, the median home price was $391,800, according to the NAR, and the 6% commission paid by a typical seller was $23,500.
Up next for NAR is an appeal of the $1.8 billion lawsuit from October, which won’t be decided anytime soon.
“Typically antitrust cases like this take about a decade,” said June Babiracki Barlow, the general counsel for the California Association of Realtors. But, she added, that “we’ve never seen a damage award this big.”
If the commission structure shifts to separating the commissions, it could mean big savings for home sellers because they’d only have to pay for their own agent. But it could make buying a home even more expensive because buyers would either have to pay out of pocket for representation or go without a broker, if they didn’t negotiate for the seller to pay the fee.
The rash of cases brought recently against the NAR and other brokerage firms may result in separating seller commissions, said Vasi Yiannoulis-Riva, a partner at the New York real estate team of international law firm Withersworldwide. She added that the changes could create more competition amongst agents, as well as having “a profound effect on how brokerage commissions are paid across the country.”
In August, Bright MLS, which covers markets in the Mid-Atlantic, changed its requirements so that listings could offer compensation of any percentage or amount for a buyer’s broker — including $0.
In October, the NAR said it is neither requiring nor encouraging MLSs to change their data fields to permit $0 fees, but they were advising that doing so would now comply with the NAR’s MLS policy, which was a change from prior policy.
In an indication of what may be coming for the rest of the country, the Real Estate Board of New York — New York City’s leading trade association — rolled out a new policy it called the “future of how residential real estate is transacted” that will decouple agents’ commissions and require any compensation for the buyer’s broker that is coming from the seller to come directly from that seller, not another broker.
A history of litigation
Tension over NAR’s gatekeeping for listings would again spill into more litigation in 2005, when the Department of Justice filed a civil antitrust lawsuit against NAR challenging policies and related rules that obstructed real estate brokers who used “innovative internet-based tools” to offer better services and lower costs. In a 2008 settlement with the DOJ, NAR-affiliated MLS were no longer allowed to withhold listings from brokers who serve customers online.Broadening access to the MLS would later allow online property listing behemoths like Zillow and Redfin to flourish. But as the internet became a critical part of home shopping, the commission rate stayed constant even while home prices surged.
The median priced home in 1950 was $7,354 (about $93,000 adjusted for inflation), according to the US Census, making a 6% commission $441 (about $5,500 in 2023). By 2000, the median home price was $119,600 (about $215,000 in 2023), allowing agents to split a fee of $7,176 (about $12,800 in 2023.) In October, the median home price was $391,800, according to the NAR, and the 6% commission paid by a typical seller was $23,500.
Up next for NAR is an appeal of the $1.8 billion lawsuit from October, which won’t be decided anytime soon.
“Typically antitrust cases like this take about a decade,” said June Babiracki Barlow, the general counsel for the California Association of Realtors. But, she added, that “we’ve never seen a damage award this big.”
If the commission structure shifts to separating the commissions, it could mean big savings for home sellers because they’d only have to pay for their own agent. But it could make buying a home even more expensive because buyers would either have to pay out of pocket for representation or go without a broker, if they didn’t negotiate for the seller to pay the fee.
The rash of cases brought recently against the NAR and other brokerage firms may result in separating seller commissions, said Vasi Yiannoulis-Riva, a partner at the New York real estate team of international law firm Withersworldwide. She added that the changes could create more competition amongst agents, as well as having “a profound effect on how brokerage commissions are paid across the country.”
Changes already
Some incremental changes have already taken place in the way residential real estate is done, with some of the MLSs allowing a wider variety of commission arrangements to be represented in listings even before the verdict.In August, Bright MLS, which covers markets in the Mid-Atlantic, changed its requirements so that listings could offer compensation of any percentage or amount for a buyer’s broker — including $0.
In October, the NAR said it is neither requiring nor encouraging MLSs to change their data fields to permit $0 fees, but they were advising that doing so would now comply with the NAR’s MLS policy, which was a change from prior policy.
In an indication of what may be coming for the rest of the country, the Real Estate Board of New York — New York City’s leading trade association — rolled out a new policy it called the “future of how residential real estate is transacted” that will decouple agents’ commissions and require any compensation for the buyer’s broker that is coming from the seller to come directly from that seller, not another broker.
Chadstroma
Footballguy
Appeals court hears arguments on reopening the DOJ's probe into NAR.
(HousingWire by Brooklee Han). The National Association of Realtor's ongoing battle with the Department of Justice is heating up again. On Friday, a three-judge appellate court panel in Washington, D.C. heard oral arguments from both NAR and the DOJ, over whether the federal agency will be able to reopen its probe into the trade group. A three-judge appellate court panel seemed amenable to allowing the DOJ to reopen its investigation into NAR at Friday's oral arguments.
The DOJ's Antitrust Division would like to investigate NAR's Clear Cooperation Policy and Participation Rule, which are currently at the epicenter of the proliferating commission lawsuits. Based on reports from several news agencies, the panel of judges seemed inclined to allow the DOJ to reopen its probe.
In 2020, the DOJ's antitrust division agreed to a settlement after investigating the trade groups listing and agent compensation policies. The settlement proposed at the time included requirements for NAR to boost transparency about broker commissions and to stop misrepresenting that buyer broker services are free.
However, the DOJ, under new leadership in the Biden administration, withdrew the settlement in July 2021, stating that the terms of the agreement prevent regulators from continuing to investigate certain association rules that they feel harm buyers and sellers.
(HousingWire by Brooklee Han). The National Association of Realtor's ongoing battle with the Department of Justice is heating up again. On Friday, a three-judge appellate court panel in Washington, D.C. heard oral arguments from both NAR and the DOJ, over whether the federal agency will be able to reopen its probe into the trade group. A three-judge appellate court panel seemed amenable to allowing the DOJ to reopen its investigation into NAR at Friday's oral arguments.
The DOJ's Antitrust Division would like to investigate NAR's Clear Cooperation Policy and Participation Rule, which are currently at the epicenter of the proliferating commission lawsuits. Based on reports from several news agencies, the panel of judges seemed inclined to allow the DOJ to reopen its probe.
In 2020, the DOJ's antitrust division agreed to a settlement after investigating the trade groups listing and agent compensation policies. The settlement proposed at the time included requirements for NAR to boost transparency about broker commissions and to stop misrepresenting that buyer broker services are free.
However, the DOJ, under new leadership in the Biden administration, withdrew the settlement in July 2021, stating that the terms of the agreement prevent regulators from continuing to investigate certain association rules that they feel harm buyers and sellers.
Chadstroma
Footballguy
An older article but I just came across it
By Andrew MartinezNovember 03, 2023, 5:22 p.m. EDT4 Min Read
The shockwaves from the recent real estate commissions verdict are still reverberating, and the impacts to the mortgage industry could be numerous.
Three major real estate players face at least $1.7 billion in damages after a federal jury this week ruled in favor of home sellers challenging commission rules. Losing parties in the Sitzer/Burnett trial, including the National Association of Realtors, vowed to appeal both the damages and the verdict, and a resolution could be years away.
Tuesday's decision didn't immediately reshape commission rules, but NAR and major brokerages face two more class action complaints and possible scrutiny from the Department of Justice. As real estate agents weigh the future of their business, mortgage experts see both negative and positive outcomes for lenders.
"This has been a long time coming," said Greg Sher, managing director at NFM Lending. "It evens the playing field for all involved. And most importantly, depending on what's created on the back end of this, hopefully it will lead to lower fees for consumers."
In this 3-part series of articles, we have addressed the changing environment lenders find themselves competing in today and how these changes are...
PARTNER INSIGHTS FROM CORELOGIC
Today's rules mandating seller brokers offer compensation, even if it's $0, to a prospective buyer agent for access to a multiple listing service remain unchanged. Any new rules putting the agent commission burden on prospective borrowers could affect low-to-moderate income and first-time homebuyers already facing a historically unaffordable market, experts have warned.
Keefe, Bruyette & Woods recently suggested the Federal Housing Finance Agency and other housing stakeholders are discussing a commission financing workaround which won't disrupt the underwriting and origination process. A buyer could also negotiate a closing credit from the seller equal to some or all of the buyer agent commission in exchange for a higher home sale price, according to their report.
"I'm confident something will happen whether it's rolling the buyer fees into the transaction or mortgage companies creating tools where they can participate in assisting the buyer," said Sher.
The Mortgage Bankers Association has yet to comment publicly on the verdict, while mortgage broker groups remained neutral ahead of the trial.
A potentially weaker MLS system could reduce barriers to entry for alternative home sale methods, such as the iBuying model deployed by publicly traded firms Offerpad and Opendoor, Keefe, Bruyette & Woods said. Leaders of those companies in recent earnings calls said any commission rule changes would have little impact on their expenses.
Strained housing supply could be unlocked with less commission friction, KBW added. Home builders, who are already offering competitive mortgage rate buydowns, could pass potential buyer agent commission savings to prospective buyers.
Aalto, a digital housing marketplace which connects sellers to buyers directly, is already seeing a boost with its nontraditional model, founder and CEO Nick Narodny said. The Bay Area startup, which works with its network of third-party LOs, offers customers a rebate around 1.5% of a commission, which borrowers have been using for buydowns, Narodny said.
"You have to find a loan officer that's willing to do that right, willing to apply a rebate to a 2-1 buydown," said Narodny. "But most are in this market."
Conversely, Realtors marginalized by any structural changes present a counterparty risk to loan officers, experts said. Real estate agents aren't yet fleeing the industry, but firms including Anywhere Real Estate, RE/MAX and Redfin have already distanced themselves from NAR.
"If I'm a top producing loan officer, and I've spent the past 10-to-15 years cultivating relationships with buyer agents, and their role was minimized in any way, shape or form, then there is trailing risk for loan officers," said Matt VanFossen, CEO of Absolute Home Mortgage and board member at the Community Home Lenders of America.
The industry veteran, speaking before this Tuesday's verdict, also raised the possibility of more agents pursuing dual-employment opportunities, or split compensation situations in which they work with a lending team in a bifurcated process.
Lenders with direct-to-consumer models or embedded partnerships could also be an "effective mousetrap" for purchase volumes, KBW also predicted. Its report pointed to Rocket Cos., the industry's largest direct-to-consumer player.
"RKT will need to find ways for its product to better penetrate the homebuyer segment, a strategy it has been focusing on through its Rocket Homes and Rocket Money applications," analysts wrote.
Brokerage investors had a negative reaction to Tuesday's verdict, while mortgage stocks remained largely unaffected. Zillow shares, which fell 10% following the jury's decision, rebounded by Friday afternoon after CEO Richard Barton hinted the company would benefit from a reshaped marketplace.
If buyer agencies fade, Zillow would "be an odds-on favorite to become the leading digital listings marketplace," he said, before suggesting such dominance would be negative for both consumers and the industry at-large.
Experts suggested the commission news hadn't yet entered the consumer zeitgeist. Loan officers have a short attention span, are too focused on surviving today's market and won't be concerned until fundamental changes arise, Sher said.
"This is a big opportunity for mortgage companies to differentiate themselves by going out of their way to be a resource for buyers in figuring out what that means," he said. "Because there's going to be a lot of confusion, a lot of uncertainty."
How commissions litigation could affect mortgage lending
By Andrew MartinezNovember 03, 2023, 5:22 p.m. EDT4 Min Read
The shockwaves from the recent real estate commissions verdict are still reverberating, and the impacts to the mortgage industry could be numerous.
Three major real estate players face at least $1.7 billion in damages after a federal jury this week ruled in favor of home sellers challenging commission rules. Losing parties in the Sitzer/Burnett trial, including the National Association of Realtors, vowed to appeal both the damages and the verdict, and a resolution could be years away.
Tuesday's decision didn't immediately reshape commission rules, but NAR and major brokerages face two more class action complaints and possible scrutiny from the Department of Justice. As real estate agents weigh the future of their business, mortgage experts see both negative and positive outcomes for lenders.
"This has been a long time coming," said Greg Sher, managing director at NFM Lending. "It evens the playing field for all involved. And most importantly, depending on what's created on the back end of this, hopefully it will lead to lower fees for consumers."
Implementing customer-centric solutions using a transformation roadmap
In this 3-part series of articles, we have addressed the changing environment lenders find themselves competing in today and how these changes are...
PARTNER INSIGHTS FROM CORELOGIC
Today's rules mandating seller brokers offer compensation, even if it's $0, to a prospective buyer agent for access to a multiple listing service remain unchanged. Any new rules putting the agent commission burden on prospective borrowers could affect low-to-moderate income and first-time homebuyers already facing a historically unaffordable market, experts have warned.
Keefe, Bruyette & Woods recently suggested the Federal Housing Finance Agency and other housing stakeholders are discussing a commission financing workaround which won't disrupt the underwriting and origination process. A buyer could also negotiate a closing credit from the seller equal to some or all of the buyer agent commission in exchange for a higher home sale price, according to their report.
"I'm confident something will happen whether it's rolling the buyer fees into the transaction or mortgage companies creating tools where they can participate in assisting the buyer," said Sher.
The Mortgage Bankers Association has yet to comment publicly on the verdict, while mortgage broker groups remained neutral ahead of the trial.
A potentially weaker MLS system could reduce barriers to entry for alternative home sale methods, such as the iBuying model deployed by publicly traded firms Offerpad and Opendoor, Keefe, Bruyette & Woods said. Leaders of those companies in recent earnings calls said any commission rule changes would have little impact on their expenses.
Strained housing supply could be unlocked with less commission friction, KBW added. Home builders, who are already offering competitive mortgage rate buydowns, could pass potential buyer agent commission savings to prospective buyers.
Aalto, a digital housing marketplace which connects sellers to buyers directly, is already seeing a boost with its nontraditional model, founder and CEO Nick Narodny said. The Bay Area startup, which works with its network of third-party LOs, offers customers a rebate around 1.5% of a commission, which borrowers have been using for buydowns, Narodny said.
"You have to find a loan officer that's willing to do that right, willing to apply a rebate to a 2-1 buydown," said Narodny. "But most are in this market."
Conversely, Realtors marginalized by any structural changes present a counterparty risk to loan officers, experts said. Real estate agents aren't yet fleeing the industry, but firms including Anywhere Real Estate, RE/MAX and Redfin have already distanced themselves from NAR.
"If I'm a top producing loan officer, and I've spent the past 10-to-15 years cultivating relationships with buyer agents, and their role was minimized in any way, shape or form, then there is trailing risk for loan officers," said Matt VanFossen, CEO of Absolute Home Mortgage and board member at the Community Home Lenders of America.
The industry veteran, speaking before this Tuesday's verdict, also raised the possibility of more agents pursuing dual-employment opportunities, or split compensation situations in which they work with a lending team in a bifurcated process.
Lenders with direct-to-consumer models or embedded partnerships could also be an "effective mousetrap" for purchase volumes, KBW also predicted. Its report pointed to Rocket Cos., the industry's largest direct-to-consumer player.
"RKT will need to find ways for its product to better penetrate the homebuyer segment, a strategy it has been focusing on through its Rocket Homes and Rocket Money applications," analysts wrote.
Brokerage investors had a negative reaction to Tuesday's verdict, while mortgage stocks remained largely unaffected. Zillow shares, which fell 10% following the jury's decision, rebounded by Friday afternoon after CEO Richard Barton hinted the company would benefit from a reshaped marketplace.
If buyer agencies fade, Zillow would "be an odds-on favorite to become the leading digital listings marketplace," he said, before suggesting such dominance would be negative for both consumers and the industry at-large.
Experts suggested the commission news hadn't yet entered the consumer zeitgeist. Loan officers have a short attention span, are too focused on surviving today's market and won't be concerned until fundamental changes arise, Sher said.
"This is a big opportunity for mortgage companies to differentiate themselves by going out of their way to be a resource for buyers in figuring out what that means," he said. "Because there's going to be a lot of confusion, a lot of uncertainty."
Da Guru
Fair & Balanced
That answer is no. There is a diner I go to that the servers work their tails off, but the average tab for 2 is maybe 20-25 bucks tops.
Even if I go to Ruth Chris, refilling my water is the same effort as bringing me a 30 dollar glass of bourbon..but the bourbon get the server 6 more dollars in tip.
I always felt that every home sale commission should be bid on by agents. In a hot market that homes are selling in under a week the commission rate should be negotiated.
Say a 500K home is for sale in a hot market, one agent should be able to say. "I will sell it for 5%, then another should be able to say. This home will sell in days, I will take 3%"
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Chadstroma
Footballguy
Commission lawsuit is filed in Arizona. But NAR isn't the target.
(HousingWire by Brooklee Han). Arizona brokerages and Realtor organizations named as defendants in the latest copycat commission lawsuit, filed last Friday. The wave of commission lawsuits have arrived in Arizona. In a copycat suit filed last Friday in U.S. District Court in Arizona, Joseph Masiello, an Arizona resident and home seller, accuses several real estate companies of colluding to artificially inflate real estate agent commissions.
Masiello sold a home on an Arizona MLS through HomeSmart "in or about October 2021." According to the filing, Masiello was "required to pay a 2% commission ($8,200) to the seller broker and a 2.5% commission ($10,250) to the buyer broker."
Like the other commission lawsuits, the Masiello suit takes aim at the National Association of Realtors' Participation Rule, which requires listing brokers to make a blanket offer of compensation to the buyer's broker in order to list a property on a Realtor-affiliated MLS.
"This archaic commission structure has remained insulated from market forces for almost 30 years because of a long-running conspiracy among Defendants to implement and enforce anticompetitive restraints in the residential real estate market," the complaint reads. "No pro-competitive justification exists for Defendants' conspiracy, which functions to perpetuate inflated commissions to the detriment of Arizona homeowners. Even if some pro-competitive benefit did come from Defendants' conspiracy, that alleged benefit would be substantially outweighed by the conspiracy's anticompetitive effects and would therefore not be justified."
Though the suit takes aim at NAR's Participation Rule, it does not name NAR as a defendant. Instead the suit lists the state's largest Realtor organizations, including Arizona Association of Realtors, Phoenix Association of Realtors, Scottsdale Area Association of Realtors, and West and Southeast Realtors of the Valley Incorporated, as well as several local and national brokerage firms, including, HomeSmart, My Home Group, Realty One Group Arizona, West USA Realty, Hague Partners Holdings, Realty Executives, Arizona Best Real Estate, North&Company, Silverleaf Realty, Walty Dailey Local Luxury, Christie's International Real Estate, Brokery, Roy H Long Realty Company, and Tierra Antigua Realty.
The complaint argues that the local Realtor organizations "participate in and further the conspiracy by agreeing to adopt, implementing, and enforcing rules in Arizona identical to those promulgated by the NAR, including through their control of the Arizona MLSs."
Similar to all of the other copycat suits filed after the Sitzer/Burnett jury verdict in late Oct. 2023, the Masiello suit is seeking class action status for all persons who used any brokerage defendant to list and sell a home on an Arizona MLS and paid a buyer broker commission between Jan. 5, 2020, and the present.
The plaintiffs are also seeking treble damages of an amount to be determined at trial or by the court, injunctive relief preventing the defendants from engaging in what the plaintiff believes is "unlawful" behavior, and a jury trial.
The defendants did not immediately return a request for comment.
(HousingWire by Brooklee Han). Arizona brokerages and Realtor organizations named as defendants in the latest copycat commission lawsuit, filed last Friday. The wave of commission lawsuits have arrived in Arizona. In a copycat suit filed last Friday in U.S. District Court in Arizona, Joseph Masiello, an Arizona resident and home seller, accuses several real estate companies of colluding to artificially inflate real estate agent commissions.
Masiello sold a home on an Arizona MLS through HomeSmart "in or about October 2021." According to the filing, Masiello was "required to pay a 2% commission ($8,200) to the seller broker and a 2.5% commission ($10,250) to the buyer broker."
Like the other commission lawsuits, the Masiello suit takes aim at the National Association of Realtors' Participation Rule, which requires listing brokers to make a blanket offer of compensation to the buyer's broker in order to list a property on a Realtor-affiliated MLS.
"This archaic commission structure has remained insulated from market forces for almost 30 years because of a long-running conspiracy among Defendants to implement and enforce anticompetitive restraints in the residential real estate market," the complaint reads. "No pro-competitive justification exists for Defendants' conspiracy, which functions to perpetuate inflated commissions to the detriment of Arizona homeowners. Even if some pro-competitive benefit did come from Defendants' conspiracy, that alleged benefit would be substantially outweighed by the conspiracy's anticompetitive effects and would therefore not be justified."
Though the suit takes aim at NAR's Participation Rule, it does not name NAR as a defendant. Instead the suit lists the state's largest Realtor organizations, including Arizona Association of Realtors, Phoenix Association of Realtors, Scottsdale Area Association of Realtors, and West and Southeast Realtors of the Valley Incorporated, as well as several local and national brokerage firms, including, HomeSmart, My Home Group, Realty One Group Arizona, West USA Realty, Hague Partners Holdings, Realty Executives, Arizona Best Real Estate, North&Company, Silverleaf Realty, Walty Dailey Local Luxury, Christie's International Real Estate, Brokery, Roy H Long Realty Company, and Tierra Antigua Realty.
The complaint argues that the local Realtor organizations "participate in and further the conspiracy by agreeing to adopt, implementing, and enforcing rules in Arizona identical to those promulgated by the NAR, including through their control of the Arizona MLSs."
Similar to all of the other copycat suits filed after the Sitzer/Burnett jury verdict in late Oct. 2023, the Masiello suit is seeking class action status for all persons who used any brokerage defendant to list and sell a home on an Arizona MLS and paid a buyer broker commission between Jan. 5, 2020, and the present.
The plaintiffs are also seeking treble damages of an amount to be determined at trial or by the court, injunctive relief preventing the defendants from engaging in what the plaintiff believes is "unlawful" behavior, and a jury trial.
The defendants did not immediately return a request for comment.
Snotbubbles
Footballguy
Refin is like a 2% fee to sell (maybe it was 2.5%). My RE agent said they'd match the whatever fee Refin was offering when I considered selling my house.
Stoneworker
Footballguy
We have a deal...
Realtors Reach [Nationwide] Settlement That Will Change How Americans Buy and Sell Homes
Groundbreaking $418 million legal agreement could drive down commission rates and shrink the number of real-estate agents
The National Association of Realtors has reached a nationwide settlement of claims that the industry conspired to keep agent commissions high, it said Friday, a deal set to usher in the biggest changes to how Americans buy and sell homes in decades.The $418 million agreement will make it easier for home buyers to negotiate fees with their own agents and could lead more buyers to forgo using agents altogether, which has the potential to drive down commission rates and force hundreds of thousands of agents out of the industry.
NAR agreed to abandon longstanding industry rules that have required most home-sale listings to include an upfront offer telling buyers’ agents how much they will get paid.
If the settlement is approved by a federal court, listings of homes for sale in most parts of the country would no longer include upfront offers to buyers’ agents starting in mid-July, and buyers would be able to negotiate compensation upfront with their agents.
The settlement money will be distributed to recent home sellers nationwide.
The settlement will resolve wide-ranging legal exposure for the industry, which has been facing a series of antitrust lawsuits similar to the Kansas City case.
The rule changes make the industry newly vulnerable to the forces of technological change that have driven down fees for travel agents and stockbrokers.
The changes also require many real-estate agents that work with buyers to sign agreements with their clients about what services they will provide and how much they will be paid.
The new commission structure could pose challenges for first-time buyers and others who are struggling to save for a down payment. Because the buyer’s agent’s commission has long been baked into the sale price, the buyer was able to finance that cost over the length of the mortgage instead of having to pay it upfront at the closing table.
It is possible that little changes for consumers in the near term because many sellers are used to including the cost of a buyer’s agent in their sale price. But over time, new brokerage business models could emerge that make it easier for buyers to choose low-cost options.
Source: WSJ 3/15/24
STEADYMOBBIN 22
Footballguy
I’m going to go out on a limb and say that this will be a disaster and cause more problems than it fixes.
Pretty much like everything after the lawyers and government gets involved.
Pretty much like everything after the lawyers and government gets involved.
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Zegras11
Footballguy
It's going to kill the first time home buyers market unless lenders some how let buyers add the commission to their loan.
10 years and 150 first timers, and I think maybe two had the cash above a down payment for this that I've dealt with. And rates now have already crippled that market.
Terminalxylem
Footballguy
I’ll take the under.
Realtors shouldn’t be necessary for many home purchases, and a contraction in the industry is long overdue.
Runkle
Footballguy
3% made some sense when homes were 100k. Now though? Is someone really doing $30,000 worth of work to sell a house in a week in a tight market where every home gets a dozen all-cash offers? You do six deals a year and you're earning in the top 1%. Bill based on hours or something else instead of a flat rate.
Not following why this is a bad thing? (unless you're a realtor)
Stoneworker
Footballguy
Short term? Yes, there will be some disruption. That's always the case in industries that have been following monopolistic practices for too long.
Longer term it will unleash pent up market forces (e.g. technology) and spur innovation. Consumer costs will fall.
See: Travel agent commissions, stockbroker commissions
Terminalxylem
Footballguy
No kidding. Living in a high cost area, seems like everybody and their brother wants to work in RE. You might think the competition would lead to better service, but on the contrary, its all over the map.
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My thinking also. Especially the low end of the market where first time home buyers are usually most strapped for cash.
Nugget
Footballguy
Looks like an opportunity for title companies to offer more direct services. Short term I see this as slowing down the process. Buyers are thinking houses should be cheaper without commissions and sellers want to keep the money they were paying. Not sure who will be there to move the process along.
Houses should be cheaper, why wouldn't they be?
Nugget
Footballguy
Sellers don’t think their homes are worth any less today than yesterday. They are looking at this as a 6% raise.
Doesn't really matter what the sellers think.
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the moops
Footballguy
Of course it does. I don't think this will change the market for a little while, if at all. People are accustomed to listing and paying X amount of money for X amount of square footage in X locale. Just because the money will go to the seller instead of an agent isn't going to change that all that much, IMO
IvanKaramazov
Footballguy
I could be wrong about the specifics of the RE industry, but it seems to me that the supply of housing is a lot less elastic than demand, at least in the short run. If that's true, then realtors' fees were always being paid (in practice) by sellers. Having those fees go away would therefore be a small windfall for sellers, not buyers.
Edit: And like moops said, I kind of doubt that this has a huge effect on the housing market. It will certainly have a large effect on the job market for realtors.
BassNBrew
Footballguy
So if this happens in July, I wonder how the transition will be in the mean time. Sellers won't want to sign 5-6% contracts. No one will want to put 0% in the compensation area in the interim. Buyers aren't going to want to sign contracts guaranteeing buyer's agents payment when the seller's are still offering payment.
That's not how markets work. Both buyers and sellers should save money by paying less in commissions.
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here's an article if anyone wants to read about it
www.businessinsider.com
Home prices could go down now that the biggest group of real-estate agents agreed to lower commissions
The National Association of Realtors said it would pay $418 million in damages to settle lawsuits that claimed the NAR kept commissions unfairly high.
www.businessinsider.com
the moops
Footballguy
Old market - house listed for 400K. Buyer pays 400K, seller gets 400K minus 6% commission
New market - house is still listed for 400K. Buyer still pays 400K, seller gets 400K minus whatever the lower commission is
What am I missing?
BassNBrew
Footballguy
The sellers of houses not selling will be more inclined to reduce the price as they are less likely to be upside down. Once these comps settle in, it will either reduce or IMO drag down the future price growth.
eta - Short term I think you are right.
Stoneworker
Footballguy
You're missing the fact that an educated buyer can tell the seller to pound sand...lower the price by $12K (3%) or I'm not buying.
It's all a function of relative market dynamics and negotiating power. In a buyers' market, the seller caves. Or vice versa. Or somewhere in between.
the moops
Footballguy
But there is still a huge lack of supply. Houses are still routinely going over asking price. The buyer tells the seller to pound sand and the seller just goes on to the next buyer. I agree about the educated buyer, but educated sellers are gonna just hold out
Stoneworker
Footballguy
If the seller is educated, they will know that they effectively just raised the asking price. If they get it, then good for them (and in the meantime realize their agent gave them bad advice on the listing price). If not, then the house sits on the market because it is over-priced.
And in regards to the bolded, that is only the current market dynamics. It may completely change next month or next year. It is incredibly imprudent to make structural industry decisions based on today's supply/demand situation.
ChiefD
Footballguy
Our house goes on the market next Wednesday. My agent put us on a Pre-MLS blast for other agents to see a coming soon listing. We have two visits already scheduled for next week. Two more people stopped at our garage sale last weekend to tell us they are going to visit the house.
I'll happily pay the commission because I don't wanna **** with this. I don't want to do all the legwork and all the photos and all the professional advice. I don't wanna sift through any offers that come and I'll take the advice of the professional I hired.
I KNOW I could probably sell this myself. I could negotiate a lower rate. But I wouldn't be getting this agent we hired. I would be getting someone less thorough and professional. To me it's the same reason pay for any professional to come to my house to fix things. Or whatever.
I'll happily pay the commission because I don't wanna **** with this. I don't want to do all the legwork and all the photos and all the professional advice. I don't wanna sift through any offers that come and I'll take the advice of the professional I hired.
I KNOW I could probably sell this myself. I could negotiate a lower rate. But I wouldn't be getting this agent we hired. I would be getting someone less thorough and professional. To me it's the same reason pay for any professional to come to my house to fix things. Or whatever.
Stoneworker
Footballguy
As a market participant, you can do as you please. None of the required changes to listings even take effect until mid-July. And that's only if approved by federal court as stated in the posted article.
Zegras11
Footballguy
This is a great post.
I specialize in the lower end first time buyers. After my divorce is August, had to sell our 7 bedroom, 4 bath 4000 sq foot house.
I hired the #1 agent for this type of sale at 5%. Best money I ever spent. I was too attached to the house. No way could I make an objective decision. Her marketing was off the charts. Tons of many little extra things also.
It turned out to become a very complicated, three house domino sale. Being able to bounce ideas off her to fully protect me in that situation was invaluable. Instead of getting $10K earnest money non refundable, we negotiated $10k EM non refundable EVERY month on her advice until the buyers home sold. There was no way they were ever going to back out after I had $40k in my account. They could have easily backed out months later over $10k if they found a better deal, and I would have been ****ed badly with no home sale or new home purchase.
Zegras11
Footballguy
Open houses rarely sell homes. They are basically done for buyers agents to get leads.
The average home owner has no clue how to handle negotiations for inspection and appraisal issues. A home owner can EASILY put themselves in a huge liability situation if they don't handle inspection issues correctly.
Capella
Footballguy
All this information is readily available with one Google search. Anybody can do this if they put the legwork into it.
FreeBaGeL
Footballguy
Tons of realtors in 2021-2022 were consulting buyers to waive their inspection rights to make their offers more appealing. I was right there in the thick of it all. Offer $200k over asking, waive your inspection period, waive your appraisal gap. All so they could get that sweet 3%.
I said at the time that realtors in 2021-2022 were like lending agents in 2007-2008.
A good realtor can be very helpful especially to a new buyer (once you've been through the process once though, you pretty much know what to look for going forward). Working in the industry I would wager that fewer than 10% of realtors are good realtors that actually work as a fiduciary. The rest are just salesmen where their own clients are the mark.
I work in STR property management and 9 out of 10 clients that book a consulting call with me have been wildly mislead by their realtor, who clearly just overpromised to close the deal.
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Stoneworker
Footballguy
Do the transaction work yourself or hire a professional. No one cares.
That's not the issue. The issue is who pays whom for services performed on their behalf.
- Seller's agent works for the seller and is currently paid by by the seller
- Buyer's agent works for the buyer, but is currently paid by the seller.
Once buyers start paying for services performed on their behalf, then current price and other distortions will be removed. The industry will adjust accordingly and behave closer to a free market to the benefit of everyone
There will be cost savings via reduced transaction costs, as well as better price discovery for the asset itself.
That's not the issue. The issue is who pays whom for services performed on their behalf.
- Seller's agent works for the seller and is currently paid by by the seller
- Buyer's agent works for the buyer, but is currently paid by the seller.
Once buyers start paying for services performed on their behalf, then current price and other distortions will be removed. The industry will adjust accordingly and behave closer to a free market to the benefit of everyone
There will be cost savings via reduced transaction costs, as well as better price discovery for the asset itself.
culdeus
Footballguy
Oh come on. Inspection issues are on the buyer. If they don't like the inspection they can walk. Buyers just want to try to squeeze the seller often times and most listings now are as-is around here.
Terminalxylem
Footballguy
Interesting points, which make sense.
But as a general rule, how has removing obsolete middle people/arbitrary fees impacted price in other industries?
