The proposed settlement of litigation against the National Association of Realtors has been portrayed as a sea change and a huge win for homebuyers, but members of the local real estate industry are not so sure.
Technically, the proposed settlement eliminates the requirement that listing brokers or sellers make offers of compensation to buyer brokers. If such offers are made, there will no longer be any requirement that they be “blanket, unconditional or unilateral,” according to the language of the settlement.
But local real estate professionals do not expect such offers to disappear — or even change in any material way.
If the settlement is approved, offers of compensation for buyer brokers or representatives would also disappear from the industry database known as the Multiple Listing Service, or MLS.
Homebuyers will also be required to sign agreements with their brokers at the outset of working together, which will need to include an agreement on how the broker will be paid.
The settlement has been touted as a death knell for commissions of 6% sales commissions, which have traditionally been shared between the listing agent and buyers’ agent.
But whether that actually happens remains to be seen, say local real estate professionals.
“In all honesty, a lot of it feels like change for change’s sake,” said Jack Attridge, the head of the Attridge Group and a luxury properties specialist at William Raveis.
Compass real estate advisor Andrew Oliver agreed. “It is not the revolutionary change people like to describe it as.”
One thing that many in the real estate industry seem to agree on is that the National Association of Realtors did not defend the case against it very well, Attridge and Oliver both said.
Attridge and Oliver also agree that the settlement is unlikely to have much of an impact on home prices.
“If you are going to change prices, you need to reduce demand,” Attridge said. “[The settlement] has nothing to do with any impact on demand.”
Oliver concurred, “The price is set by the market. It is not set by agents.”
A common misperception is that the settlement will eliminate the practice of sellers paying commissions to buyer’s agents, Oliver said. Instead, it will merely add an extra step to the process. Where once a buyer’s agent could see the commission in the MLS database, going forward, they will have to pick up the phone or call the listing agent and ask, “What commission are you offering to the buyer’s agent?” he said.
Nothing in the settlement would prohibit that exchange of information, he noted.
In Massachusetts, a state with robust consumer protections, agents have long been required to present their clients with a “licensee-consumer relationship disclosure,” Attridge noted.
“Buyers and sellers are very much aware of who represents whom,” he said.
Attridge added that it has long been the practice at his company when he and others first meet with sellers to have a “compensation discussion,” detailing the benefit of offering compensation to the buyer’s agent.
“One of the huge misconceptions is that NAR sets any sort of [standard] fee,” Attridge said, noting that Raveis is known as a “5% company,” which will typically but not always split that fee equally with the buyer’s agent.
Attridge said that one of his concerns with the proposed settlement will be the effect on consumers when the fee arrangement is taken out of MLS, thus becoming less transparent.
Buyers may also wind up at a disadvantage if they eschew the use of an agent to save money, he added.
There is also an opportunity for discrimination within the new proposed guidelines, he added. At a minimum, there are some wrinkles to be ironed out. For example, the Veterans Administration loan process does not allow veterans to pay for an agent, Attridge noted. First-time homebuyers — including minorities — could also be put at a disadvantage, given what may be less of a capacity to pay a broker’s fee out of pocket rather than through the sale proceeds, he said.
Attridge said that he does see one positive to the settlement. In theory, full-time professionals like himself will be at an advantage as buyers bring new scrutiny to who is representing them.
“People who take it more casually may not provide the level of service buyers are going to be keenly aware of, now that they are paying out of pocket,” Attridge said.
Oliver agreed, “If you want good service, you pay for it.”
