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  • Writer's pictureKimberly Dotseth

The Proposed NAR Commission And Terms Settlement


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The National Association of Realtors has proposed settlement terms to encompass the end of a lawsuit brought in Missouri -- but the terms will affect all Realtors nationwide. Not all real estate licensees are Realtors. We at Blend belong to NAR and therefore because we pay dues, we are Realtors. There are over 1.2 million Realtors nationwide. The non-Realtors will be affected too though because most subscribe as members to a local MLS in order to trade properties. You can be a non-Realtor and also be a paying MLS member in almost all states.


The money settlement of $418 million will first be paid to the Missouri attorneys, then the few plaintiffs involved. The crux of the case was the belief that some Missouri sellers did not understand or were not told that commissions have always been negotiable. The Missouri listing agreements were very misleading. Unlike California's listing agreements, which are crystal clear. To all NAR members, we know it’s obvious that commission has always been negotiable. In my 25-years+ as a NAR member, we have never been told or even had a conversation even once about commission from anyone at NAR, the state associations or local associations. It does not happen.


Besides the payout, which I disagree with and I also disagree with this settlement altogether, another term will be that all MLSs nationwide that have a NAR affiliation cannot display a co-op commission to a buyer's agent. Our MLS structure was built to show co-op commission going back to when a digital MLS was crafted in approximately 1990. The offer of compensation is why the MLS exists. Without that, we will go back to the days of what is called sub-agency, where buyers feel it is in their best interest to write an offer through the listing brokerage. Using the listing agent to do so is called dual agency (head’s up: the listing agent still primarily works for the seller). Using another agent in the firm to write the buyer's offer is called sub-agency.


In addition, a new settlement term will be that all buyer's agents must have a buyer broker agreement signed with any buyer to send them homes online, to show them a home in person, and to write an offer. That agreement will show what the buyer has agreed to pay the agent for their services. This will be shown to a seller during an offer. The buyer and agent can ask a seller if they will help pay that buyer agent commission during an offer (after July 2024), and the seller can say no.


The listing agents will still need to discuss two things at the kitchen table when signing a listing agreement: 1) what is the listing side commission, which becomes set and non-negotiable after signing; and 2) what will a seller be willing to pay a buyer's agent?


If a seller says they don't know or they will decide as they go along, that is not a viable listing for a listing agent. No one will want to take time and invest funds in a listing to go down the road of "maybe" or commission co-op decisions made along the way. It also opens up the door to discrimination lawsuits and the such.


It will be in the seller's best interest to still offer something fair, which we listing agents can talk to the other side about on the phone, also maybe in email or text (the amount offered just can't be in the MLS as a number or in words). If a buyer's agent calls me to ask the commission being offered on my listing, and all of them will call, and I say we are offering zero, they can simply tell the buyer that this is not a house to see, as they both know that the buyer really doesn't have the funds to pay. The buyer's agent doesn't have to work for free.


Then, after a series of those calls on a "no co-op" listing, I will tell my seller that I had seven calls to show the home, but the commission offered was zero and all seven agents/buyers moved on. Wake up call.


Previous to this settlement, a buyer's agent could not commission shop: they had to show a house to a buyer no matter if the co-op was $500, 1% or 3%. Now, that rule goes out the window. Agents can refuse to show a property over the offered co-op commission. That’s new!!


My feeling is that there will be 6 months to a year of chaos and sorting, then the wisest sellers will want all showings and they want quality buyers and their agents to come to the door. And they will be willing to pay for that agent to bring them an offer. Like it is now.


There will always be sellers who want to be in a low commission transaction -- they have existed forever. There will be discount agents, as there are now. We at Blend are not that, because we are some of the best brokers in the state. We earn every dollar we are paid.


Buyers won't want to sign a buyer broker agreement because it lays out that they are on the hook for commission if they want a house and the seller is offering zero. These will be legally binding contracts with buyers.


And the listing agent can't write the offer for a buyer without the same buyer broker agreement, because if they write a buyer's offer, they also need a buyer broker agreement with that buyer! They are now the buyer's agent! There is no end-run for a buyer. There is no way to avoid the buyer broker agreement.


I think this settlement will eliminate a lot of first-time buyers from markets who feel out of money for commission that they now have to pay. They will be quickly overwhelmed. Savvy sellers will catch on quickly to know that to get top dollar, they need to offer a co-op as has been done for decades. Prices of homes are certainly not going to drop.


The media has gotten so much of this wrong because they don't write from a place of understanding how real estate contracts work and will work. NAR has not clarified media errors because the lawsuit is not yet settled. They can't speak on it yet.


We know that change is good and hopefully this change is good. But it won't be good for buyers. And it won’t be good for sellers who think that commission to sell a home is going away. There is more nuance during the offer phase regarding commission and I can answer that flow of work in a private conversation.

 

Kimberly Dotseth, Broker and Owner, Blend Luxury Real Estate

California DRE License #01179760 Phone: (619) 261-1909

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