The NAR Lawsuit update Part 2
This my second in a series of updates on the pending litigation against NAR (The National Associations of Realtors), and since the settlement announcement, there have been numerous articles and stories in the media on what this means for buyers and sellers.
Regrettably, many of these reflect a profound lack of understanding of the real estate business as well as mistaken claims. Below, I’ll go through a few of the inaccuracies that the media has reported to consumers, providing you a real-time, insider’s look at what's really going on and how it affects you and your home's value.
The National Association of Realtors recently announced a settlement agreement with class-action plaintiffs in the Sitzer-Burnett case (aka the NAR lawsuit) pending final approval by the court in August. The suit has challenged the way in which residential real estate is transacted in this country, which is sellers hiring an agent to represent their interests for a professional fee and then offering compensation to an agent who represents the buyer in a transaction.
- The National Association of REALTORS® (NAR) does not set commissions – they are negotiable. The rule that has been the subject of litigation requires only that listing brokers communicate an offer of compensation. That offer can be any amount, including zero.
- The settlement does not force real estate brokers to reduce their compensation. Realtor fees have always been negotiable, and Realtors may cooperate on transactions toward a common goal yet remain fiercely independent and highly competitive with one another.
- The settlement will not prohibit sellers from paying a commission to a buyer’s agent. The practice of whether to pay a buyer’s agent is totally a seller’s decision, and nothing changes in terms of options. The most important outcome is the successful sale of the property on the seller’s terms, and having the greatest incentive to buyer’s agents to show and sell the home is the best way to achieve their goals.
- The settlement will not relieve sellers of any financial burden of buyer agent fees. Although sellers can elect not to pay any buyer agent compensation, that doesn’t mean they will avoid the economics. Buyers may easily write into any offer a contingency requiring that the seller cover the cost or may request other concessions, such as a closing cost credit in the dollar amount they are paying their representative.
- The settlement does not reduce the total cost of transaction services as sellers will no longer pay the buyer’s agent compensation. Should sellers now choose to compensate only the listing agent, it merely means that buyers, rather than sellers, will now have to pay for their own representation and will most likely build that into the offer.
- The settlement will not necessarily lower real estate prices and make homeownership affordable again. General values in real estate are determined by the fundamentals of supply and demand, not Realtors. Yes, the commission represents an expense of a transaction, yet these also include title fees, closing fees, mortgage-related expenses, property taxes, association fees, etc.
The broker’s fee is not the reason home prices have soared. The reason homeownership is increasingly less affordable is that due to a lack of inventory the values of homes in our market have risen dramatically. A broker’s compensation for services rendered in respect to any listing is solely a matter of negotiation between the broker and his or her client, and is not fixed, controlled, recommended, or maintained by any persons not a party to the listing agreement,
In my next update I'll be bringing you up-to-speed on any changes to the lawsuit, and a reminder that this is only a proposed settlement, and we won't know exactly what the final settlement will be until mid-August.
I hope you found this information to be useful and informative, and if you're curious as to what this all means for the you and value of your home you can call/text/email me and we can discuss this in detail