Just San Ramon Homes

Clarifying The NAR Real Estate Lawsuits

Judge Holding Gavel

If you pay attention to Real Estate related news, you have probably read about a number of class action lawsuits recently filed against the National Association of Realtors (NAR) and a number of real estate brokerages across the country. Many of these articles are so full of disinformation that I feel it makes sense to explain what the settlement proposal really means for buyers and sellers. And note that it is just that – a proposal. If ratified it would not come into effect until at least mid-June.

NAR defines many of the requirements that MLS’s have to follow and the lawsuits accused NAR of price-fixing in that there was a requirement for listings in the MLS to state the amount of compensation to be paid to the broker representing the buyer.

Now in California, most listing agents charge a commission fee of between 5% and 6% of selling price. But a part of that (typically half) was paid to the buyer’s broker. In my more than 20 years experience in Real Estate, this has always been made very clear in the Listing Agreement*, and certainly explained by me to the seller. There has never been a requirement to compensate the buyer’s broker more than $1 but I always recommended that the compensation was half the total commission. A seller has always had the opportunity to negotiate the buyer’s broker commission as well as the total commission to be paid, but offering half the commission is intended to incentivize the buyer’s agent to show the home and to compensate for the work involved.

It seems that in some other states, this is not made so clear in their Listing Agreements, resulting in these multiple lawsuits.

Now in order to settle these claims, NAR has proposed that, as well as paying a substantial amount of compensation, the buyer side commission may no longer be stated in the MLS. There is no requirement to change the practice of the seller paying a given amount to the buyers broker, but any buyer’s agent will need to get this information from the listing agent.

Note that, because this is a class action law suit, the likely end result is that the lawyers reap millions of dollars in fees, while the plaintiffs will just get a few dollars each.

Now what will be the outcome of all this? We really don’t know. Some people say it will put some agents out of business. Others say it will bring down prices. But it’s all speculation. Personally, I think that honest,ethical agents will continue to thrive, and house prices will continue to increase. In any event it will be a few months before we know exactly what is happening, so take anything you read from less than knowledgeable sources with a pinch of salt.

* If you would to see a copy of the California Listing Agreement so you can see how this is explained, just send me an email and I’ll get it over to you.

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