Negotiating agent commissions

negotiating agent commissions
Brokerage models (infographic from nar.realtor)

It’s no secret that residential real estate agent commissions are decreasing. Market forces has created new broker models that has put downward pressure on commissions. Many agents embrace consumers negotiating agent commissions.

If market forces are working in negotiating agent commissions, and commissions are decreasing, you might wonder about a recent class-action law suite.

If successful, an anti-trust class-action law suit filed March 6th could potentially change the landscape of the residential real estate industry.  The law suit alleges that the National Association of Realtors and a number of major real estate brokerage brands engaged in “anticompetitive practices.” 

According to the law firm Hagens Berman (hbsslaw.com), “the lawsuit alleges NAR and the Big Four have enacted a set of anticompetitive policies intended to prevent competition among real estate brokers, as well as stopping buyers and sellers form negotiating commissions, including: Only allowing listing brokers to list a property on an MLS if the listing broker makes a unilateral, non-negotiable offer of compensation on the MLS to buyer brokers. Prohibiting buyers and sellers from negotiating buyer broker commission. Prohibiting brokers from disclosing commissions offered on MLS. Allowing brokers to take both buyer and seller commissions, if the buyer is not represented by a broker. This anticompetitive activity has been devised at the national level and enforced at the local levels.”

I am not an attorney, but I have been listing and selling homes for over seventeen years.  These thoughts are my own. I am not speaking for anyone except myself.  I am offering insight from my professional experience.

On the face of it the lawsuit assertions are false. First, the allegations make it sound as if home sellers have no choice in how they sell their home except to use a full-service exclusive real estate broker.  As I wrote just last month, home sellers have many options in selling a home.  Besides selling “By Owner,” there are multiple broker options as well, including (but not limited to) MLS placement services, limited services and à la carte. 

These assertions also make it sound as if a home seller can only get an “exclusive right to sell” listing agreement with a real estate broker.  But again, the home seller has options in the type of listing agreement and broker agency type.  Because my space is limited and the issue of brokerage representation is technical, I won’t expound on the types of listing agreements and home seller representation.  However, each type of listing agreement has specific benefits and disadvantages.

Furthermore, commissions have always been negotiable. And market forces have been in favor of consumers negotiating agent commissions. The lawsuit’s assertions about real estate commissions are misconceived and cliché.  The matter of real estate commissions can be complex and depends on a number of factors, which can include (but is not limited to) market conditions, type of representation, types of services provided, among other things.  Additionally, home sellers are not the only party to a transaction that negotiates commission.  Home buyers who are represented by a broker negotiate the buyer agent commission as well.

The internet has created an empowered savvy consumer.  Like other industries, public access to information (internet) has been a major factor in reducing real estate broker fees and commissions.  Both listing broker and buyer agent commissions have decreased.  The internet has allowed home buyers to find home listings on their own regardless of advertised buyer agent compensation, including non-MLS listings such as home builder and FSBO listings. 

Although the NAR has yet to issue a formal statement, NAR vice president Mantill Williams was quoted as saying on Fox Business’ Bulls and Bears program, “We think this lawsuit is baseless and it has no merit. The state and federal courts have considered challenges to the MLS and they’ve concluded the Multiple Listing Service actually benefits consumers.”

Original published at https://dankrell.com/blog/2019/04/02/negotiating-agent-commissions/

By Dan Krell. Copyright © 2019.

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