Because I’m a Realtor (see previous post for the significance of that designation, please), I just assume that everyone, in all avenues of life, has heard about all of the real estate rule changes and shifts. Well, if you’re not well versed on the August 2024 settlement between the people of Missouri and the National Association of Realtors, grab a little Pop Secret and your favorite box wine and let The Rambler fill you in.
For as long as anyone can remember (unless their memory extends beyond the early 1990s), listing agents negotiated a commission percentage with their sellers for services provided to sell their home. As part of the listing agreement, the listing agent disclosed how much of the commission percentage would be allocated to the buyers agent. In some instances, a listing agent would write stipulations in the provisions for instances when the buyer was unrepresented. Either way, the details were clearly laid out and the seller(s) signed off on it.
The problem, of course, is that they kinda had to. Because the offered buyer agency commission is openly displayed on the Multiple Listing Service for all realtors to see, any seller unwilling to offer a buyer agent a commission for helping their clients to buy the home would immediately have their home dismissed from consideration, with good reason. After all, this ain’t UNICEF. So, if sellers decided it was crazy to essentially pay for the agent of the buyer, their property would become a pariah, unworthy of a look. So what was a seller to do?
And so it went for 30+ years. The sellers would willingly pay the commission of both sides, the fee would essentially be cooked into the sales price, the buyers would be cool with paying for that fee over the course of 30 years, and we all continued to go to work. Then…
In 2019, a group of people in Missouri decided enough was enough. They said that the idea that sellers were paying all the commissions violated antitrust and sued the flatfooted National Association of Realtors to the tune of $1.8 BILLION dollars, with a B. That money would go to all those poor folks throughout this nation that had the misfortune of paying buyer agency commissions for all those years, the argument being that the sellers had no other recourse but to fork over the dough for everyone involved in the transaction. With that lawsuit, we were off to the races.
For the next 5 years, attorneys from both sides battled and battled and…had some phone calls and…some lunches ensued and…battled and battled and…probably had some negotiation conversations and…well, they had a lot of billable hours. At the end of it all, the NAR and the kind people of Missouri settled on $418 million to aid in America’s ongoing suffering. The grand majority of that money went to the attorneys for both sides. The remaining $30k (give or take) was divvied up between the 9 million (give or take) people who sold a home in the past 30 years.
For three months after the settlement, brokerages everywhere scrambled around trying to understand how to comply with this new reality. What forms should we use? What are the right words to say to buyers? You want an agency agreement when?? And the problem was that the states didn’t really know, either. Each state was different and they were all figuring it out on the fly. My agency had many, MANY meetings to discuss how they wanted each scenario to play out, including how they wanted our language in the buyer and seller agreement provisions to read, mostly because New Hampshire didn’t do a stellar job of being thorough. Nobody wanted to be wrong and nobody knew what was right.
I had some fears. I feared that a large number of buyers would go at it alone without the assistance of a buyer’s agent. This fear wasn’t drenched in greed, but compassion. I thought that buyers would feel it would be the only way they could buy properties they really desired. I feared, if they were to do that, it would lead to many, many lawsuits. Against sellers because of an unsatisfactory living situation and against listing agents for not offering their opinions to the buyers, something those agents aren’t able to give due to their fiduciary responsibilities to the sellers. I thought of all the things that can go wrong. Look, I’m not under some weird disillusion that real estate agents are modern day messiahs, but I can say that we’re here for the good, looking out for everyone’s best interests.These are huge purchases for people and we want them to be protected. This felt wrong.
Eventually, things settled down. We’re now nearly 6 months into this transition and what I’m finding is this: sellers are offering commissions to the buyers agents because if they don’t, their property would be at a disadvantage. Sound familiar? Sellers certainly aren’t required to offer these things and all would be right with them if they didn’t, but buyers interested in their property would either have to go without an agent or would have to come up with the commissions themselves, a herculean task for some that are struggling to come up with down payments and closing costs in the first place. So, a buyer might love a particular property but may feel as if that property falls out of their reality due to their needs, either representative or monetary. Thus, sellers are willingly offering proceeds towards buyer agency commissions or closing costs, not out of seeming necessity, but in an effort to make their properties more desirable. As it was before, it’s baked into the purchase price and everyone seems OK with it. Sellers seem to be at peace because it feels like their decision.
So who won and who lost? Well, attorneys cashed, so that’s cool. The NAR is probably feeling a little bit of a sting, but they get my $800 a year so they’re doing just fine. I would imagine the whistleblowers in the Ozarks are a little bummed that their big stand turned into a turkey sandwich for all of the tortured, voiceless victims they were standing up for (even though nobody asked them to in the first place). Agents lost a little because of the mild chaos. Seemingly, buyers and sellers are exactly the same.
When this started in 2019, it felt like it was a solution to a non problem. Fast forward 5 years, it still feels that way. Sellers get peace of mind, involved lawyers get their Wagyu on Saturday nights, and the beat goes on. Much ado…