Numerous news headlines concerning the pending settlement between the National Association of Realtors and plaintiffs represented by attorneys have been inaccurate and misleading.

Even my trusted news sources had stories with headlines that read, “Realtor settlement expected to lower housing prices” and “The Realtor settlement will help home buyers but prices are still too high”

Let's take a look at the facts

Who filed the lawsuit? 

Jonathan Sitzer and other lawyers brought a lawsuit against the National Association of Realtors, Long & Foster Companies, Re/Max, Keller Williams, Realogy Holdings Corp., HomeServices of America, Inc. and others. 

What was the complaint? 

According to the National Association of Realtors, the "Sitzer-Burnett is a class-action lawsuit that was filed in Missouri federal court by a group of home sellers in the state against NAR and other defendants, including Anywhere, Berkshire Hathaway HomeServices, Keller Williams and RE/MAX. The plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates."

What was the National Association of Realtors response? 

NAR agreed to a settlement which includes paying $418 million dollars to the plaintiffs and their lawyer over a four year period.  The National Association of Realtors reached a nationwide settlement ending litigation of claims brought by home sellers related to the broker cooperative commissions. 

The settlement is subject to court approval. NAR denies any wrongdoing in connection with the Multiple Listing Service cooperative commission model. NAR will pay $418 million dollars over a four year period.  

However, on February 15, 2024, the Department of Justice filed a statement of interest regarding the settlement. The DOJ says listing brokerages and sellers should be prohibited from offering compensation to the buyer brokerage in a transaction. The DOJ statement aims to remove the option, to offer any compensation to a buyer brokerage.

What happens now?

Two big changes will impact home buyers and sellers.

First, NAR is creating new rules, expected to go into effect mid-July 2024, prohibiting offers of compensation to buyer brokerages on the Multiple Listing Service. This includes the disclosures offered by the listing brokerages and the agent remarks section on the MLS.

Second, buyer brokerage agreements will be required by real estate agents working for buyers. The agreements must be signed by buyers and their agents before visiting any properties for sale. The agreements must include beginning and end dates, terms of the agreement and compensation for the buyers representation. (buyer’s agent or exclusive buyer’s agent)

How will the settlement affect home buyers?

On April 16, 2024, Fannie Mae and Freddie Mac declared that "fees or costs traditionally covered by the property seller as per local customs are exempt from financing concessions restrictions." This implies that sellers can provide financing concessions for the borrower's closing expenses, and any compensation offered to the buyer's agent commissions will not be restricted.

According to information provided at a recent Maryland Association of Realtors online seminar, NAR is making efforts to address the current rules regarding a VA loan which, at this time, do not allow a borrower to directly pay their buyer's agent.

Finally, the listing brokerages will not be allowed to show buyer brokerage compensation anywhere on the Multiple Listing Service, a practice that has been in place for decades.

How will buyer agents be paid?

Since new buyer broker agreements are being created at this time, the expectation is there will be a variety of options for buyer agent compensation.

Home sellers through their listing brokerages can continue to offer buyer agent compensation however this cannot be included anywhere on the MLS. Compensation for buyer agents could be included on real estate brokerage websites. 

1. There may be a compensation addendum added to the contract to go towards the buyer agent compensation
2. The buyer may compensate the buyers agent

What is our position on decoupling commissions? 

We want buyers to be able to negotiate and pay their representatives the same way sellers can by including compensation for representation within the real estate transaction. Simply, home sellers pay their listing agents at settlement through the proceeds of the sale. Home buyers should be given the same opportunity. 

The idea that buyers, who finance the entire transaction with their funds, should have to come up with additional money makes no sense. It’s not practical and in many cases simply not an option for home buyers. 

Press Release from the National Association of Exclusive Buyer Agents

The news headlines

The real estate market goes up and down due to supply and demand. According to Freddie Mac, "the United States has a deficit of 3.8 million units needed to meet the current demand." The idea that a seller would lower the sales price of their home due to lower buyer brokerage commission doesn't make sense.

Think about it, if you determine a sales price for your home based on a comparative market analysis and determine a list price, would you then say, "I will lower my sales price because I'm not offering anything to a buyer's agent." Of course not! Every seller wants the highest price when they sell their home.

The headline reading, "The Realtor settlement will help home buyers.." doesn't make sense. Buying a home is a complicated process and requires expert guidance and advice. If sellers are banned from offering any compensation to buyer brokerages, it could force home buyers to go directly to the listing brokerage. Remember, the listing brokerage represents the best interest of the home owner/seller. They may offer assistance in assembling an offer but their first fiduciary responsibility is to the seller, not the home buyer.  Dual agency, one agent 'representing' a buyer and seller in a transaction, serves the best interests of the agent and their brokerage, not the consumer.

A personal story-

Last summer, I assisted a first time home buyer whose rental agreement was soon to expire. My client had very limited funds and her parents were helping pay the down payment and closing costs. 

After several days of touring really awful places in the District, we found a one bedroom condominium with a low monthly condo fee in Silver Spring Maryland. 

Since the condo had been on the market for over a week, I was able to negotiate a drop in the sales price and get a 3% seller subsidy to cover closing costs. Working with an experienced local lender, we were able to close in 3 weeks, just in time for my client. 

My compensation was paid by the cooperative commission offered through the MLS by the seller. If my client had to pay for my services out of pocket, she couldn’t have. She would have likely gone directly to a listing agent in an attempt to buy a condo. Since listing agents have signed agreements with sellers promising to get them the best terms, it’s not likely my client would have received the seller subsidy or a lower sales price.  

Final thoughts-

The current trajectory of the settlement fallout will be a direct attack on home buying consumers. 

I work in the Greater Washington D.C. and Baltimore area as an exclusive buyer broker. My agents are experienced, consumer-oriented professionals who advocate for home buyers in all real estate transactions.

At HomeBuyer Brokerage, we are proud members of the National Association of Exclusive Buyer Agents. We offer the highest level of fiduciary agent representation to consumers. 

If you have questions about real estate or the lawsuit and NAR settlement, reach out to us. We’d love to talk with you.

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How can we help?

The exclusive buyer agents at HomeBuyer Brokerage specialize in serving home buyers. Please reach out with questions at info@homebuyerbrokerage.com.