I’m sure most of you have been following along with the class action lawsuit against realtors that concluded in a guilty verdict on October 31, 2023.
What you need to know: The plaintiffs argued that several brokers conspired to keep and enforce a policy known as “cooperative compensation” which led to the sellers paying inflated fees.
Cooperative compensation is a portion of the listing fee charged to the seller that is paid out to a buyer’s agent who brings the buyer (through an offer contract) and represents the buyer in a transaction as a fiduciary.
Let’s say the listing fee (charged by the listing brokerage) is 6%. That 6% is split (not always evenly) between the broker of the seller’s agent and the broker of the buyer’s agent, in my case Compass.
The plaintiffs in this case have argued against (and won) that they should not have had to pay a buyer’s agent.
I have many thoughts on this…
For one… I’ll be the first to admit that it seems strange, at surface level, for a seller to pay for a buyer’s agent to effectively, negotiate against them, but don’t stop reading yet.
Second… Even though the NAR (National Association of Realtors) had required cooperative compensation in the past as an MLS rule, (it was removed shortly before the trial began…), the cooperative compensation has always been negotiable along with ALL realtor fees. Is that any different than the fees that this plaintiff attorney is charging upon winning this case?
Third… I have represented buyers in 71 transactions to-date and I will be the first to admit… some transactions have been easy with no headaches while many others have required an incredible amount of creativity and teamwork between myself, a lender, a title rep, contractors, insurance providers, even the listing agent all with the goal of getting the deal to the closing table while emotions are running hot. I don’t believe that a buyer’s agent’s value is in question (which probably isn’t a shared belief among all home owners considering the level of service in this industry can be appalling at times)
Fourth… Buyer’s agent compensation *may* shift directly to the buyer, which have it’s own set of complications. How is a buyer’s agent going to pay a buyer’s agent fee if they are already stretching their wallets to get into the home? Loan regulators *may* begin to allow a buyer to finance buyer agent commission.
Expectations moving forward…
- MLSs across the US to allow offer of 0% or $0 compensation to the buy side of the trade.
- Agents will need to continue to be members of their local MLS to access the MLS, which could require agents to maintain membership with the NAR.
- There will be significantly more promotion that commissions are negotiable.
- Impact to First-Time-Home-Buyer [if they have to pay a fee, by law] won’t be clear until after the trial and appeals.
- There will be significantly more fee transparency.
- It’s possible most future Buyer relationships will have an executed Exclusive Buyer Representation Agreement, which is something I already do.
I’d love to hear your thoughts on this matter.
As always, we are committed to keep you informed of relevant real estate information so you can continue to make smart real estate decisions.