THAT COULD RESULT IN COMMISSIONS DROPPING DRAMATICALLY. IS 6% OUT OF HERE, DI? >> IT MAY BE. THE NATIONAL ASSOCIATION OF REALTORS AGREED TO PAY $418 MILLION IN DAMAGES TO SETTLE ANTI-TRUST LAWSUITS OVER BROKER COMMISSIONS. THAT WILL GO FIRST TO PAY THE PLAINTIFF LAWYER FEES AND THEN THE CLASS.
THE SETTLEMENT MAKES CLEAR THAT NAR IS DENYING ANY WRONG DOING. THE LAWSUITS ARGUED THAT NAR VIOLATED ANTI-TRUST LAWS BY SETTING CERTAIN REQUIREMENTS THAT LED TO A STANDARD COMMISSION.
THE SETTLEMENT BANS THE NAR FROM MAKING ANY SET RULES THAT WOULD LET A SELLER’S AGENT COMPENSATE FOR A BUYERS AGENT. THE NORM WAS 5% TO 6% IN COMMISSION. BUT THE NAR DENIED SAYING THERE ARE SET COMMISSIONS, BUT THIS MEANS THAT THE AGENT MARKET WILL NOW GET MUCH MORE COMPETITIVE, WHICH COULD IN TURN LOWER COMMISSIONS.
THAT COULD, OF COURSE, HAVE AN AFFECT ON HOME PRICES. SELLERS AND BUYERS GENERALLY FACTOR IN THE COST OF THE COMMISSION, DEPENDING ON THE SELLING PRICE. IF THEY HAVE TO PAY LESS COMMISSION, THE SELLER COULD LOWER OR THE BUYER COULD OFFER LESS. IN ADDITION, ON THE MLS, THE LISTING SERVICE FOR ALL HOMES, IT SAYS ALL FIELDS THAT SHOW BROKER COMPENSATION HAVE TO BE WIPED OUT. AND THERE’S ALSO A BAN ON THE REQUIREMENT THAT AGENTS SUBSCRIBE TO MLSs IN THE FIRST PLACE TO GET COMMISSIONS.
SO THIS COULD HAVE RAMIFICATIONS OF MEMBERSHIP TO THE NAR, WHICH IS ONE OF THE MOST POWERFUL LOBBYING ORGANIZATIONS IN THE COUNTRY.
TO GET REACTION, I WOULD LIKE TO BRING IN THE CEO OF RED FIN, GLENN, THANKS FOR JOINING US. GIVE ME YOUR THOUGHTS ON WHAT THIS WILL MEAN GOING FORWARD. >> WELL, RED FIN HAS ADVOCATED FOR 18 YEARS FOR LOWER COMMISSIONS. IF THIS LEADS TO LOWER COMMISSIONS, WHERE BUYERS DECIDE HOW MUCH TO PAY THEIR AGENT, THAT IS GOOD NEWS.
THERE ARE MANY DETAILS WE’RE TRYING TO PARSE. IT’S 108 PAGES, JUST RELEASED THIS MORNING. BUT THE FUNDAMENTAL ISSUE AROUND COOPERATION BETWEEN THE BUYERS AND SELLERS AGENT ON FEES IS ONE THAT WE’VE BEEN FOCUSED ON FOR A LONG TIME. WE THINK THIS CAN MAKE A REAL DIFFERENCE IN HOW THIS INDUSTRY OPERATES. >> NOW, RED FIN HAS BENEFITED BECAUSE YOU HAVE A FLAT COMMISSION THAT IS LOWER, AND THAT’S HOW YOU MARKET YOURSELF, IS THAT CORRECT?
IF YOU BRING EVERYBODY ELSE DOWN IN THAT PLAYING FIELD, DOES RED FIN LOSE ITS EDGE? >> WE WANT TO SAY WE’RE BRINGING PEOPLE UP.
BUT YES, WE HAVE ALWAYS OFFERED CONSUMERS A BETTER DEAL. WE OBVIOUSLY BELIEVE WHEN PEOPLE DECIDE HOW MUCH THEY PAY THEIR OWN AGENT, THEY WILL BE MORE PRICE SENSITIVE ABOUT IT. WE’VE ALREADY SEEN THAT WITH SELLERS.
THEY ARE MUCH MORE CAREFUL ABOUT HOW MUCH THEY PAY THEIR OWN AGENT. THOSE FEES HAVE COME DOWN FROM 3% TO 2%. BUT BUYERS HAVEN’T HAD THAT SAME FREEDOM. AND NOW PERHAPS THEY WILL. IT’S STILL VERY MUCH IN DISPUTE WHETHER THE SELLMENT WILL BRING THAT ABOUT.
BECAUSE SOME MEMBERS OF THE INDUSTRY ARE SAYING THERE WILL BE OTHER WAYS THAT SELLERS AND BUYERS AGENTS CAN COOPERATE. BUT JUST ENDING THAT ONE FIELD IN THE MLS SHOULD MAKE A REAL DIFFERENCE. >> WILL IT MAKE IT MORE COMPETITIVE, AS IF I’M A HOME SELLER, I CAN SAY I’M NOT GOING TO TAKE THIS AGENT UNLESS YOU LOWER THE COMMISSIONS, AND COMMISSIONS COULD COME SO FAR DOWN THAT IT WOULDN’T BE AN AGENT’S TIME.
>> PEOPLE WANT TO TOUR HOMES LISTED BY REMAX, REDFIN. BUT THE BUYERS AGENT WILL HAVE TO TALK TO THE BUYER ABOUT WHAT FEE SHE WILL CHARGE, AND THEN THAT FEE MAY BE INCLUDED IN THE OFFER, WHERE THE SELLER CAN SAY I’M NOT WILLING TO PAY THAT FEE.
THAT’S COMING OUT OF MY POCKET. SO THEREFORE, JUST LIKE ANY OTHER TERM, THE INSPECTION, THE PRICE, WHEN IT CLOSES, THE BUYERS AGENT FEE IS UP FOR GRABS. THAT HASN’T HAPPENED IN MY NEARLY 20 YEARS IN REAL ESTATE. >> DO YOU THINK THIS WILL LOWER HOME PRICES? >> I HEARD YOU SAY THAT, BUT I DON’T THINK SO.
I THINK THE SELLER IS ALWAYS TRYING TO GET AS MUCH AS THEY CAN.
SO M.
Read More: “VA Non-Allowables: What They Mean for Veterans During the Home Buying Process”
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