Welcome! This is my very first blog post on my new updated website, so I hope all 4 of the readers enjoy :). May as well start out with a bang on some hot takes on a hot button issue! Please submit any comments or questions at the bottom.
NAR Settlement
You may have heard about the recent lawsuit against the NAR and the resulting settlement. Here’s a set of FAQs from NAR’s side of it if you need a refresher: https://www.nar.realtor/the-facts/nar-settlement-faqs. The short of it is: the lawsuit was about perceived unfair practices and lack of transparency in commission structures, and whether those practices resulted in artificially raising commission amounts.
Now, I will admit that representing a buyer but getting paid from the seller can be seen as a little odd from a conflict of interest standpoint. However, it’s miles better than how it used to be when buyers were “represented” by the listing broker. And, while the optics aren’t great on the system, in real-world practice from my perspective – it works. I’ve never felt any sort of duty towards any seller while representing my buyers. And, it enables any buyer to have representation by eliminating any out-of-pocket expenses on their end. Having an agent doesn’t lower their buying power or hurt their pocketbook. If buyers had to pay out-of-pocket, or lower their buying power by having to add a commission to their mortgage, less buyers would have representation. Two points here that are unavoidable:
- Buyers absolutely need their own representation.
- Buyers’ brokers need to be compensated. Anyone want to work for free? Show of hands.
Is there a better, more fair way to accomplish these goals? Probably, yeah. However, the terms of this settlement are definitely not the answer. A few steps backward, if anything. It’s like they brainstormed, How do we make it worse for everyone? Maybe that’s not fair; it’s really only the one part of it that’s stupendously regressive and harmful. The rest of the “Practice Changes” (listed in the FAQ link above) make sense to improve transparency, trust, and fair practices, all which vibe with the apparent intent of the lawsuit. But the one prohibiting a listing from displaying the offered buyers’ agent commissions is absolutely bonkers. Note that it doesn’t prohibit sellers from offering a commission to buyers’ agents, just from letting them know if and how much they’ll be paid. Who does this help? No one, that’s who. Hurts the sellers, listing agents, buyers, and buyers’ agents. If the lawsuit was about transparency, why does their main practice change reduce it?
Here’s where the NWMLS got it right.
As part of the settlement, all MLSs across the nation that aren’t affiliated with the NAR (NWMLS isn’t) have the option of whether to “opt-in” to the settlement or not. If they do opt-in, they gain the same immunity from future lawsuits the NAR brought, but have to share in the cost, and adopt the agreed-upon rule changes. And to my surprise and delight, the NWMLS showed some spine and declined to opt in. The NWMLS had already adopted nearly all of the “practice changes” listed in the settlement well before there even was a settlement – way out in front it, in fact. They declined because of the obviously terrible one. Again before the settlement, the NWMLS decided to increase transparency rather than remove it, by adding the offered commission amounts for public viewing. Before that rule change, only agents could see the offered commission amount. You can see their press release detailing the transparency changes made here: https://www.nwmls.com/nwmls-leads-the-industry-in-providing-consumers-with-transparency-choice-and-options-to-negotiate/
Ever since the news of the settlement broke, there has been tons of disinformation and just plain wrong takes on the whole thing. Sadly, this Seattle Times article about the NWMLS decision is no different. The author and their Consumer Federation of America “Fellow” (along with many others admittedly) seem to think the whole point of the lawsuit and everything about it is “agents get paid too much” as opposed to being about fair practices and transparency. On an unrelated note, I think the solution to save newspapers from going the way of the dodo is to cut journalists pay by 50% :). What they don’t seem to understand is that commissions are and have always been (as long as I’ve been in the business) negotiable. Day 1 stuff there. But agents and agencies absolutely have the right to determine what they will and will not work for. Just like everyone else in the world. What we’re striving for is a fair, transparent, and equitable system. Instead of giving kudos to the NWMLS for improving fair practices and transparency, this article just seemed to lament that none of the changes reduced commission amounts, as if that was the whole point of it all. If anything, all that proves is that the previous practices weren’t artificially inflating commissions at all. It’s almost as if commissions have always been negotiable…
Solutions?
Honestly, I don’t have one. I do know that reducing buyers’ options for representation is not the solution. Attacking buyers’ agents for having the audacity to want to be paid for their work is not the solution. If buyers’ agents aren’t getting paid, they disappear. So either buyers pay them out-of-pocket by adding the cost to the down payment and closing costs, etc. (impossible for many buyers; certainly most first time homebuyers who need an agent the most), or they go unrepresented. The Consumer Federation of America guy argued for:
“a complete separation of commissions paid to buyers’ agents and sellers’ agents and for lenders to allow homebuyers to include payment to their agent in their mortgage.”
-Stephen Brobeck, a Senior Fellow at the Consumer Federation of America. https://www.seattletimes.com/business/real-estate/wa-real-estate-service-will-not-join-national-antitrust-settlement/
Would this work? Sure. As explained above, it would probably result in more buyers (likely the ones who need it the most) going unrepresented, but they’d have the choice. Thing is, it’s all the same money; this is just quibbling about how it gets shifted around; whose side of the settlement statement it’s on. It likely wouldn’t save the sellers a dime, though they might feel better not seeing that fee on their side of the settlement statement. Here’s why — if that were to be enacted — if I were to then perform a CMA, I’m treating any buyers’ agent commission paid the same as sellers’ concessions (gets deducted from the value). I’d have to think appraisers would do the same. Regardless, the problem is that lenders do NOT currently allow homebuyers to pay their agents with their mortgage (that I’m aware of). So maybe I’m biased, but it kinda seems like everyone may be barking up the wrong tree, no?
