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Summary of the Lawsuit
A significant lawsuit against the National Association of Realtors® (NAR) and other major real estate agencies has recently changed how real estate agent compensation works. The lawsuit argued that certain practices around agent commissions were unfair, resulting in new rules that impact how agents are paid when a property is sold. The following are keys points to help you as a home seller or buyer navigate how the real estate business actually works.
Key Points:
- Two-Agent Transactions: In most home sales across the U.S., two agents/agencies are involved—one representing the seller and one representing the buyer. Our study shows that approximately 89% of transactions are consummated this way versus one agent/agency representing the seller and the buyer 11% of the time.
- Seller’s Agent Commission: Traditionally, the seller’s agent and the seller agree on a commission rate, which has always been negotiable. There’s no fixed or standard rate; however, market trends have created a common range that homeowners perceive to be a standard even though commissions have always been negotiable, including up to the time a sales contract (versus a listing contract) is signed by all parties.
- Multiple Listing Service (MLS): Properties for sale are listed on a system called the Multiple Listing Service (MLS) that real estate agents/agencies pay a membership fee to belong to and access the inventory of property listings for sale. This system also shares property details via websites and apps with companies that pay a fee to publicize them.
- Buyer Agent Compensation in the Past: When a property was listed on the MLS, the seller’s agent would usually offer a commission to any buyer’s agent who helped sell the property. Buyer’s agents could either accept or negotiate this compensation. The clear benefit to the seller is the attraction of buyer agents, who again bring nearly 89% of the buyer traffic.
- New Rules on Buyer Agent Compensation: Under the new rules, sellers are no longer required to offer a commission to a buyer’s agent through the MLS per MLS rules. However, sellers can still offer compensation to attract buyers’ agents and encourage them to show the property.
- MLS Exceptions: Some MLS companies are privately owned and not affiliated with the National Association of Realtors ® (NAR), so they may continue offering buyer agent compensation, however, it’s not required.
- Best Practices for Sellers: It is crucial to have an open discussion with your real estate agent about the benefits of offering compensation to buyer’s agents to stimulate maximum market activity. Doing so can increase your property’s exposure, attract more buyers, and help you get the best possible price.
