As many news outlets have reported, there a lawsuit was recently settled involving the National Association of Realtors, and several real estate brokerages include Keller Williams. Exactly how this will all shake out for our local market has yet to be determined. The following is my thinking on the whole issue and how it will impact both buyers and sellers:
Two specific changes will go into effect starting in mid-July :
1. A new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.
2. A new rule will require MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. NAR has long encouraged its members to use written agreements to help consumers understand exactly what services and value they provide, and for how much.
What was the basis for this lawsuit? There was a determination that there was some type of collusion between brokerages to establish a standard commission rate of six percent. When I first began my real estate career, a six percent commission was a norm, but certainly not a standard. In fact, during my very first week of post-licensing training, we were repeatedly told that there was not standard commission and that we should negotiate with the sellers to determine what we as agents were willing to work with and what they as sellers were willing to pay. What I quickly learned was the more experienced agents were able to command (not demand) a higher commission than those of us who were new to the business. One agent in my office routinely negotiated a seven percent commission while several newer agents had to accept a five percent commission. This was strictly, "you get what you pay for"! While I never quite proscribed to it, a lot of experienced agents would say something like, "Would you prefer to pay a little more to get a more experienced surgeon?" I do have to agree that much like a medical procedure, its okay to have a less experienced agent in your corner as long as things go accordingly. It's when things get complicated that you really need someone who knows how to handle things.
So, what does that mean coming down the road? Despite the news media's uninformed reporting, the only
people who will significantly gain from these lawsuits are the attorneys. I have represented buyers for whatever commission was being offered in the MLS. I have always represented
my buyers and sellers with their best interests in mind. For the past several
years, I have had to accept buyer agent commissions of one or two percent on a
good percentage of sales. And a
commission of 2.5 percent on the remainder. Not once in the past 3-4 years have I been able to do what the news
media called a standard three percent commission.
With the new way of doing business, all my future buyer offers will include a
seller concession to cover the cost of the buyer side commission. I don't believe home prices will be affected
downward nor will the costs of a transaction go down. It will simply be reshuffled and those of us
who are experienced and very capable will ultimately be able to secure higher
commissions. Those agents who are not
capable and nervous about their value added will simply go away. According to NAR
statistics 75 percent of Realtors fail in the first year and 87 percent fail
after five years. I do believe these numbers will be even higher. Consumers will be left with a lower number of agents with whom to work and may ultimately have to pay more for these services.
