August 17 Looms Large For Buyers’ Agents, Yet A Third Don’t Even Know About The NAR Settlement

August 16, 2024
  • A Third Of Agents Don’t Know About The Lawsuit And Confusion Will Be Severe
  • Saturday Is The Day Buyers’ Agent Compensation Gets Tested In The Marketplace
  • Sellers Likely Won’t Net Out More For Their Homes

The NAR settlement terms for Sitzer/Burnett signed last March will get baked into industry practice starting tomorrow, Saturday. NAR has ignored the issue of homeowners paying the sales commissions of buyers’ agents for years while their toxic leadership literally and inappropriately groped. Sellers pay their listing agents a commission to sell their home and essentially pay a buyers’ agent a commission to bring the buyer. Yet the buyers’ agent is working against the seller’s own interests by trying to get the lowest price for their buyer) and that was problematic for the Department of Justice but ultimately meted out in class action suits and their copycats. While there are other issues beyond buyer commissions in the NAR settlement, it seems the most disruptive to the business of selling homes.

I’ve spoken to many Manhattan real estate agents over the past several months, as well as with colleagues around the country. LITERALLY, no one I have connected with seems to know how this new world is going to look like for buyers’ agents on Day One.

New York Agents Are Waiting For Their Firms, Who Are Waiting For REBNY

In the Manhattan market, the Real Estate Board of New York (REBNY) is the dominant industry trade group (I’m an ‘appraiser’ member). REBNY is not part of NAR and probably most REBNY members are not members of NAR. Outside of Manhattan, NAR has a much more dominant foothold in associations and the various MLS organizations.

Back on January 1st, REBNY changed the coupled commissions rule before the NAR Settlement a few months later, which technically disconnected it from the full effect of the NAR Settlement, which goes into effect tomorrow. REBNY’s rule change requires the buyers’ agent compensation to come directly from the seller, not the listing broker. Is it that simple to realign commissions to be compliant with the NAR settlement?

Because REBNY is still working on the terms of the NAR settlement, some of the changes in practice by August 17 are optional recommendations, which is creating confusion:

“I’m waiting for my brokerage, who’s waiting for REBNY,” William Krooss-Tadas of Keller Williams said. “We’re waiting for a law to follow — we want to know what it is, we just don’t know yet.”

NAR And Industry Are Expecting A Lot Of Backstabbing

On Thursday, there was a statement from the NAR CEO to ‘We need to be debating from within,’ NAR CEO says. Nykia Wright pleaded with real estate pros to keep complaints in the family while pledging to earn their trust.

Real Estate News

Instead of reducing confusion with a unified voice, their interim CEO is asking to keep complaints in the family. Wow. That ship sailed a long time ago. ‘Debating from within’ is exactly why the NAR toxic culture proliferated for decades. Because NAR has been ineffective in leading the industry, concerns about chaos are high.

Confusion Reins And Backstabbing Expected

With the industry on the cusp of a new commission structure era and multiple interest rate cuts, more than one-third of all agents don’t even know there was a lawsuit, per Real’s president via Real Estate News:

Srivatsaa told viewers that over a third of all agents did not even know about the lawsuit, and there’s a high likelihood that Real agents will encounter others who are simply not prepared for the new industry practices. When faced with agents who aren’t prepared or making mistakes, Srivatsaa said that he “would offer to have a conversation” with them instead of “turning them in.” 

In an industry whose livelihoods are based on 100% commissions, NAR expects that those who are not compliant are going to experience the wrath of their colleagues.

Closing Thoughts

Tomorrow is a seminal event in the history of the real estate brokerage industry.

  • One-third of agents don’t even know about the lawsuit
  • Even the most informed agents don’t seem to know anything definitive
  • Home prices could potentially slip specifically because the buyer agent compensation won’t be wrapped up in the purchase mortgage
  • By forcing buyers to pay commissions directly, buyers will make lower offers so that sellers will probably net out the same
  • The results could range from loss of significant compensation to buyers’ agents to business as usual

It looks like the potential commission losses of buyers’ agents, if any, are going to be paid to the lawyers, and sellers are not going to net out more compensation for their homes.

Did you miss yesterday’s Housing Notes?

August 15, 2024

History Notes: My CNBC Town Hall Green Room Conversation Before The Housing Bubble Burst

Image: Chat & Ask AI

Housing Notes Reads

Market Reports

Extra Curricular Reads