RADICAL Changes to the Real Estate Industry: Who Would Have Thought?
Recently there have been a few lawsuits that have questioned realtors’ practices regarding the seller paying both selling/buying commissions. So I thought it would be a good idea to address the highlights of the recent Sitzer/Burnett v. NAR lawsuit. Below is a statement by NAR from January 2024.
“The question in the case of Sitzer/Burnett v. NAR is why brokers representing home sellers often pay the commission of brokers representing home buyers. This practice underpins local broker marketplaces where brokers compile centralized listings of all properties for sale and invite other brokers in finding a buyer.
The reason this practice has worked so well for so long is because it provides the greatest economic benefits for both buyers and sellers, creates greater access and equity for first-time, low/middle-income and all buyers and enables small business brokers to compete with larger brokers. This market has enabled 6.3 million more people to realize the American dream of homeownership from 2010 to 2020, and helped homeowners build $8.2 trillion of housing wealth over the same period.”
As a result of the Sitzer/Burnett v. NAR case, in 2023, NAR and three large real estate companies settled for more than 208 million dollars in fines. Since the ruling on this case, there are additional lawsuits that are continuing to be heard. The ramifications of this historic ruling will change how realtors get paid.
Changes for Sellers Listing Their Properties
Sellers could always negotiate the commission that is charged for an agent to list their property. There have been suggested commission rates that have varied from community to community. The major impact of the new ruling is that when the seller agrees to a listing commission, the seller can offer a buyer’s agent zero commission or a negotiated percentage.
Changes for Buyers Purchasing Property
For many years, buyers’ agents have been paid nearly automatically from the commission offered by the sellers. With the new ruling, the buyers may be asked to pay their agents’ commissions. Buyers should expect their agents to ask, “How will I get paid?” There are four potential options in which the buyer’s agent may:
1) Be paid from the listing side of the commission.
2) Negotiate directly with the listing agent.
3) Be paid directly by the buyer.
4) Work for free.
After working 20 years in real estate, I can say in full honestly that having a buyer’s agent as a team member is worth the commission. However, a buyer can always approach the listing agent directly to purchase a property. When this occurs, the listing agent becomes a Transaction Broker (TB) in the State of Colorado. This enables realtors to work with both parties. I especially like the honesty and openness that occurs when I work with both parties.
Buyers’ agents provide excellent confidence and knowledge about financing, inspection issues, insurance concerns, and community legal or zoning issues. A highly experienced agent can negotiate the best terms for their buyers, which often prevents costly mistakes. It’s priceless consulting and wisdom!
Since buyers’ agents don’t normally work for free, expect to sign forms that specify the amount of the desired selling commission, and the form will specify how you’ll pay your agent.
As an agent, it’s interesting to see how these changes are affecting realtors. I’ll keep you updated on how this change could influence your buying and selling experience. Until then, please feel free to contact me with questions. If I cannot answer a question, I will do my best to find an answer for you.
Nancy’s Disclosure: I am a proud member of the National Association of Realtors (NAR). For almost 116 years (founded May 16, 1908) NAR and its hundreds of thousands of realtors have helped buyers and sellers with one of the most important and large purchases in their lifetimes. All realtors who are a member of NAR agree to conduct business and extracurricular activities according to the Realtor Code of Ethics. We are held to a higher level of standards, while not every realtor is a member of NAR and may not follow good practice standards.