How the Realtor Commission Lawsuit Affects Homebuyers

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Apr 20, 2024

If you’ve followed the SimpleShowing blog, you already know that we write about commissions almost every week. Now that the National Association of Realtors agreed to a $418 million settlement, the game has changed in terms of how commissions might be paid in the future. A federal jury ruled that NAR and several large brokerages conspired to artificially inflate agent commissions over the course of the last decade or so. 

The NAR sponsors hundreds of multiple listing services, which operate regionally or sometimes in one specific city or county. These MLS’s often facilitated the compensation rates for both a buyer’s and seller’s agents by displaying rates to agents but not necessarily to consumers. More progress has been made recently with sites like Zillow, which now displays buyer agent commission in a format that is visible to the consumer.

Generally, the home seller negotiated with the listing agent what the compensation would be for a buyer’s agent, which appeared on the MLS. However, if a seller was unaware they could negotiate Realtor fees, they were typically locked into paying a predefined rate that the broker decided for them. Usually this rate was around 3%.

We are now beginning to see home sellers push back dramatically on the buyer agent commission that they want to offer when selling their home. In some cases, the seller may even offer 0% commission. Naturally, this could be a major deterrent for agents that are showing properties to their buyers. We expect brokerages to edit their buyer broker agreements to ensure their agents receive compensation for representing a buyer. Unfortunately, this could have a negative impact on homebuyers.

If a buyer agent does not make a certain % commission on a sale, the homebuyer themselves may be forced to make up the difference at the closing table. We think this is grossly unfair and do not require homebuyers to sign brokerage agreements when shopping for properties.

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