Friday, March 15, 2024 will very likely go down in history as the day residential real estate changed forever. Whether that’s for the better is yet to be determined. On that day, the National Association of REALTORS® (NAR) agreed to settle its legal fight against a flood of commission lawsuits that have roiled the industry over the last five years, paying $418 million in damages and agreeing to eliminate its guidance around commissions.
Agents, brokers and most everyone else within the real estate realm were likely taken aback, as NAR had indicated it would appeal, but now it looks like the fight is over. What happens next regarding buyer agent commissions and other aspects of the profession will play out over time. But there are certainly opinions being expressed now.
We asked agents, brokerage leaders and CEOs for their thoughts about the NAR settlement and what it means for the future of residential real estate. Check out part one below, and look for the next installment at RISMedia.com in the coming days.
MICHELE HARRINGTON
CEO
First Team Real Estate
Aliso Viejo, California
How will your agency operate going forward?
As a brokerage, we’ve been prepared for this for a while and have coached and trained our buyer’s agents on doing a proper buyer consultation and getting a buyer contract signed. Basically every serious buyer going forward is going to be signed with a broker just like every listing is represented. This is a good thing.
What are your thoughts on NAR settling?
Brokers are basically forced to be members of NAR (MLS and forms). We follow the rules they put in place, without any choice. They make the rules on cooperating commissions, and we follow them. We get sued, but then when NAR steps up to reach a settlement, they leave out the brokerages that pay the highest amount of collective dues to the organization. The “opt-in” they set up is ridiculous and far outweighs their contribution. So it looks to me like they saved their ass and said “screw you” to all the bigger brokers.
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PAM ROSSER THISTLE
REALTOR®
Berkshire Hathaway HomeServices Fox & Roach, REALTORS®
Philadelphia, Pennsylvania
What is your reaction to NAR settling?
Like most agents, I am in shock it happened so quickly and with no notice to agents and their brokerages, or input from membership. However, I understand that sometimes situations need to be handled in a certain way, weighing the lesser of evil outcomes.
What will be the ramifications for you and the industry in representing buyers going forward?
I will wait to hear from the leadership at my brokerage, whom I absolutely trust to have our best interests at heart. The communications thus far have been steady and reassuring. But this is a breaking development, so they are also working to interpret new rules and how to guide and support the agents.
Short-term, I signed up for the ABR certification. I love helping buyers and have so much to share. Not just about Philadelphia real estate, but as someone who has bought and sold personally many times. I help a lot of first-time homebuyers, encouraging them through the process. I truly believe it is important to own real estate to protect yourself with a valuable asset. I help them put the pieces together. With this new model, I will probably look at buyer agency as more of a hobby, for the people connection and exercise. My focus will shift to listings to keep my business viable, unless we adapt buyer representation in a way that allows for predictable compensation.
Do you think there will be many agents leaving the industry due to this?
Yes, because they need to make money to pay bills, especially in these times of inflation. Agents can’t live on a gamble. It’s devastating. These are dedicated professionals who love their job and their clients. Real estate is so intense and 24/7 that you have to love your job to stay in the business. Eighty-seven percent of agents drop out in the first three years as it is. It’s not for everyone. And it is not easy.
Is the industry potentially going the way of the travel agency business?
I don’t think so. While they don’t always respect real estate agents, buyers rely heavily on them.
How has the saga influenced your business in regard to conversations with prospective clients?
I had a buyer cry this weekend, thinking of going about the home-buying process on her own. She said she will never do it. We have been looking for three years, and I am with her until it feels right and we find the right house. She is timid, so she likes my “tough love” honesty with her. The first year I worked with her, it was all education. We knew it would take time. And we are closer. I know it won’t happen without me or another agent who takes the time to educate, support, protect and encourage her. She is a single woman paying high rent. Financially, buying makes sense. And over time, that will be her nest egg. Helping someone like this buy a home is in the best interest of the consumer.
What is the conversation with a prospective homebuyer like now? How do you handle it when potential clients ask or know what happened with NAR settling, and if buyer commissions will be drastically lower?
I explain how I am compensated now and that it may change. That the buyer may have to pay for my services or may choose to go through the process on their own. Some say they will not be able to afford closing costs in this new scenario.
What if the commission they are expected to pay is still not clear to them?
That could be a roadblock to their being able to buy a house. My hunch is that buyers will go to the listing agents (whose fiduciary relationship is with the seller) and not have the same level of representation.
How do you handle needing a contract to represent them as a buyer agent if they had no knowledge one was necessary?
I have not always used buyer agency agreements in dealing with the general public because there are some unsafe situations that can present. For example, someone calling to see a vacant house at night. I do not feel an obligation to commit to a potential buyer without a conversation of their intentions. Do I want to be committed to them when I hardly know them? The commitment is a two-way street. I don’t accept everyone who requests my services. My compromise is that I put a short timeframe on the buyer agency, for me and for them. I explain the agreement to them.
How deep will the initial conversation be regarding fees?
I am very straightforward. I will lay it out, let the buyer digest and decide, then proceed or not proceed with them. The consumer always has a choice. So does the agent.
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RONALD S. STEWART
Broker/Owner
Mohawk Valley 1st Choice Realty
New Hartford, New York
What is your reaction to NAR settling?
I’m extremely disappointed with NAR. I believe they are showing their true colors, because if you are not guilty of a charge, why settle?
What will be the ramifications for you and the industry in representing buyers going forward?
That’s the challenge. Why are they rushing this decision and forcing their members to change the way they do business in a matter of a few short months? That will be difficult to do, and it doesn’t allow us to play out the scenarios to see just who and how they will be impacted. I believe first-time homebuyers will suffer the most. So much for equality and looking out for the consumer.
Do you think there will be many agents leaving the industry due to this?
I can only hope so. One of NAR’s biggest downfalls is they care more about the quantity of members rather than the quality. Hopefully this thins things out and provides more opportunity to the full-time professional rather than the part-time hobbyist.
The fallout for this “proposed” settlement will take years to develop. I have not heard a single mention of how this will affect buyers’ financing if they are required to pay commissions. Some people are saying that buyers will be able to pay through the use of concessions. FHA allows 6%. Is that going to 9%? I don’t believe we can properly discuss the fees until we know the rules. This is par for NAR.
