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It’s one thing to declare ad nauseum that real estate commissions are negotiable; it’s another thing to be the agent that suddenly confronts the fact that the process you counted on to get paid at the end of a sale has been pulled out from under you.
“I had three deals last year [where] the commission was $1,” an agent told a committee of the National Association of Realtors during the trade group’s midyear conference, the Realtors Legislative Meetings, last week.
“I just didn’t feel like that was fair that they use the [multiple listing service] system to get the client and pay me a dollar.”
The agent’s comment prompted a “Wow” and a swell of mutters from attendees at the Risk Management Issues Committee meeting.
Committee chair Kelly Marks quickly jumped in.
“I’m sorry we can’t talk about commissions here,” he said, citing antitrust concerns.
“There are so many different models. I think that’s a conversation for you and your client and whatever agreement you have as far as buyer’s agency,” he added.
Throughout the conference, including at the committee meeting, NAR’s legal team had been periodically showing attendees the 1.5 million-member trade group’s antitrust compliance statement at the beginning of sessions to remind them of what they cannot discuss, including “agreements to fix prices, limit product or service offerings, allocate geographical territory or customers, and refuse to deal.”
Source: NAR
The reason for that is clear: NAR is currently fighting multiple antitrust lawsuits, including two bombshells that have received class-action status, over MLS rules — including a policy that requires listing brokers to offer buyer brokers a commission to list a property in a Realtor-affiliated MLS and another designed to curb off-MLS listings.
In March, the U.S. Department of Justice appealed a lower court ruling in favor of NAR that limits the DOJ’s ability to investigate these policies.
NAR has responded to the suits outside of the legal arena with competition.realtor, a website that offers educational materials to communicate the value of Realtors. Over and over again, NAR attorneys told conference attendees to “articulate [their] value” so that the public knows they are worth what they are getting paid.
The trade group also repeatedly stresses that commissions are negotiable and encourages “the continued use of Buyer Representation Agreements in order to formalize a working relationship with clients and detailing what services consumers are entitled to and what the buyer broker expects from their client in return.”
Despite the existence of various real estate brokerage models across the country and among NAR members, studies have shown that buyer agent commission rates are largely the same across the country. Though the agent’s comment may illustrate that that may be changing to a certain extent.
At the committee meeting, NAR Senior Counsel Charlie Lee stressed that agents cannot count on a “standard” commission rate and that they will have to negotiate their compensation with their clients and listing brokers.
“Our policies are intended for sellers and listing brokers to be able to determine the compensation that makes the most sense for them,” Lee told the agent.
“It allows for $1 or any other amount. If the offer of compensation is not satisfactory to the buyer’s agent that is something that you can negotiate with the listing broker. So it is something that’s handled outside of the multiple listing service.
“But what’s important is that you need to talk to your client about that and … buyer representation agreements are a great vehicle in order to be able to do that. There is no standard commission rate. This is something that needs to be discussed with your clients and consumers so that you guys are on the same page.
“It’s important to articulate your value proposition so that they understand why it is that you are worth what it is that you’re getting paid because all of those things provide great value.”
“It should be discussed before showing the property,” he added.
NAR’s Multiple Listing Issues and Policies Committee did not consider or approve any policy changes at its midyear meeting and therefore no MLS policies went up for a vote at the trade group’s board of directors meeting at the end of the conference on Thursday.
A subset of the committee, the MLS Technology and Emerging Issues Advisory Board, typically receives and considers policy changes before putting them forward for consideration to the entire committee. But although the advisory board did consider policy proposals, it did not take any action on them and so did not recommend them to the full committee, Jeffrey Levine, the advisory board’s chair, told the MLS committee at its meeting last week.
His comments at the meeting made clear that the antitrust lawsuits are a factor in the advisory board’s evaluations of proposed MLS policy changes.
“The advisory board will be seeking to assess and evaluate MLS policies to ensure that we serve the core tenets of the MLS and that the MLS remains a pro-competitive and pro-consumer local broker marketplace,” Levine said.
“The advisory board will continue to receive and consider ideas and proposals about existing or new policies. As always the governance process will be kept and followed. The advisory board will answer any questions and provide interpretations of any national policy to ensure accurate understanding.”
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