Recently the National Association of Realtors and several brokerages were found guilty and ordered to pay $1.8 billion in damages for conspiring to ‘artificially inflate’ Realtor commissions. The verdict has been appealed, however prior to the verdict the parent company (Anywhere) of my own brokerage (Coldwell Banker) settled the lawsuit out of court and agreed to pay $83.5 million. My guess is Anywhere saw the writing on the wall, that change is coming to the industry. It looks like they settled the lawsuit cheap, if you can call $83.5 million cheap. However imminent, change is going to take time. The lawsuit is being appealed, which means a resolution could be years and lots of lawyer billable hours away. It makes me wonder ultimately how much this lawsuit is costing to litigate.
Allow me to backtrack and discuss how commissions are currently determined. When a seller enters into a contract sell their home, they negotiate not only their own agent’s commission, but also commission offered to the buyer’s agent. This means that the buyer has no say in what their agent is being paid. The lawsuit wants to allow buyers the opportunity to negotiate their commissions. That’s fine, but in the post lawsuit world the buyers would potentially not only get to negotiate their agent’s commissions, they would actually have to come out of pocket to pay them. That means their closing costs could go up in the neighborhood of 2.5-3%, depending on what they have negotiated with their agent. In our current market where interest rates have risen to levels that haven’t been seen in over two decades buyers are having a hard enough time affording a house to begin with, and this potentially will only make home ownership less affordable.
The Bay Area Real Estate Information Services Multiple Listing Service currently allows listing agents to input ‘0’ as the amount sellers are offering to pay buyer’s agents. I have never seen it happen, but it's day may come. However it is foreseeable that some sellers are going to keep offering buyer’s agents commissions. It’s perfectly within their rights. Not only will that make those properties more affordable, it will also give those sellers an advantage over properties that aren’t offering to pay commission. Until we see the market shift where most sellers aren’t offering commission to the buyer’s agents, I would advise sellers to keep offering commission to buyer’s agents.
Note to buyers and buyer’s agents, it’s time to familiarize yourself with the CAR Form BRBC. In English, that’s the California Association of Realtors Buyer Representation and Broker Compensation Agreement. While it’s rarely been used in Marin County, we are going to start seeing a lot more of this agreement in the market. Realtors are going to want to ensure they are paid for their efforts. Conceivably if they don’t have the agreement in place and the sellers are not offering commission to the buyer’s agent, the buyer’s agent could sell a house and not get paid.