What to Keep in Mind as NAR’s ‘Remarkable Deal’ Becomes Reality

A leading MLS lawyer breaks down the settlement that removes offers of compensation from MLSs and requires more robust buyer agreements starting August 17.

Key Points:

• Attorney Brian Schneider said NAR was “put in a corner,” and it saw the March settlement deal as the best solution.
• An “incredibly aggressive” DOJ continues to put pressure on the association, however, “without ever filing suit.”
• Agent pay, on both the buy-side and sell-side, could be affected — something Schneider, and the industry, will be keeping a close eye on.

As the industry rolls toward August 17, when rule changes required by the NAR settlement take effect, there will be bumps in the road.

In fact, there already have been — from rewritten forms to agent frustrations. So maybe a bit of perspective from a top industry lawyer will help.

“This is a pretty remarkable deal,” Brian Schneider, an attorney for Bright and dozens of other MLSs, told an audience of real estate journalists last month.

Here’s why. A jury in Missouri awarded nearly $1.8 billion to plaintiffs who claimed that the National Association of REALTORS® and others conspired to keep commissions artificially high. And that was just Missouri money: “Imagine if that were to be expanded across the country. It could be debilitating,” Schneider said.

So NAR, facing “a confluence of plaintiffs and consumer groups and the Justice Department asserting that there were major problems in the residential real estate space,” found a way to release almost every real estate agent, MLS and brokerage from almost every commissions lawsuit, he added.

OK, so that “almost” can be pretty expensive for the brokerages and MLSs that aren’t covered. But “I think NAR was ultimately put in a corner that it had to find a solution, and it did,” Schneider said.

Facing an ‘Incredibly Aggressive’ DOJ — and Bad PR

Meanwhile, NAR continues its dance with the DOJ, which recently received the court’s blessing to reopen its investigation into the association. 

“The Justice Department has been incredibly aggressive without ever filing suit,” Schneider said.

Instead, they’re filing “statements of interest” in commissions cases, saying “we agree with the plaintiffs and here’s why,” he said. And those DOJ statements, in a nutshell, say “sellers and buyers have been duped.”

“That’s a big problem when you are an industry that prides itself on being trusted by the homeowners and the homebuyers who need your services,” Schneider said. It creates “a huge PR imbalance” that agents are going to need to fight.

It doesn’t help that there are misconceptions about what the NAR settlement will do. “I will tell you candidly, I think some of the press has gotten it wrong,” Schneider said. “There was a headline immediately after the settlement that ‘NAR agrees to slash commissions.’ That is not in the settlement.”

Commissions were negotiable before the settlement, even if that part was “kind of overlooked,” Schneider said. And they will be negotiable after. But the experience will be different for everyone.

What Happens After the Deadline?

After August 17, MLSs will no longer have an entry by the seller’s agent offering buyer agent compensation. “They might be putting it on their website, on a business card or on a billboard,” Schneider said. And buyer agents can ask about it.

But it will make communication about commissions “less efficient and more confusing,” he added.

Schneider said he’ll be looking to see if brokers are still sharing commissions if they can’t do it through the MLS, and what that looks like. Purchase offers will be more likely to include compensation for the buyer broker, but if the seller isn’t willing or able to pay the buyer agent, the buyer may have to pay their agent out of pocket.

Another thing he’ll be watching: Will buyer agents be paid less? “Today, in most markets, a buyer’s broker on average is getting, say, 1.5% to 3% — every market is different. Are those numbers going down? Are buyers negotiating a different fee structure or a lower fee structure?” 

And what about seller agents? “If I’m a seller, and under this new system, my broker is not going to share compensation, am I still gonna pay the same amount?” Schneider asked. The seller may say “OK, I’ll pay you half of what you used to charge. And let’s see if the purchase agreement states what I need to pay the other side.”

That’s what the DOJ would like to see, Schneider said. But will it happen? Time will tell.

Source: Real Estate News

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