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The following blog will be a very brief history of how we currently find ourselves in a real estate industry that has had significant rule changes recently mandated. This modern history started when a lawsuit was filed by home sellers in Missouri federal court in 2019 named Burnett (formerly Sitzer), against big players in the real estate industry, the biggest being the National Association of Realtors® (NAR). The plaintiffs in Burnett alleged the defendants had engaged in anti-trust behavior, specifically as it relates to a rule created by NAR in the 1990s called Cooperative Compensation. In its most basic terms, cooperative compensation means a seller must pay both the buyer and seller commissions. So, in practice, if the seller agrees to pay a 6% commission on the sale of their house, the listing agent will receive 3% and the buyers’ agents will receive 3%. There can be variations in amounts and agent splits. The Burnett case proceeded to a jury trial and verdict for the plaintiffs in the amount of $1.8 billion in October 2023. In March 2024, the plaintiffs and NAR reached a settlement which included both monetary recovery (NAR agreed to pay $418 million) and what should be significant industry rule changes. These rule changes took effect in August 2024 and were approved by the Court in November 2024. Search our other blogs for a more detailed analysis of the rule changes and their effects on you, as well as the traps to avoid.
Negotiate the Comp was born out of these rule changes and the need for advocates to inform consumers and help effectuate real change to the industry that will truly benefit consumers. The rule changes, according to NAR, are as follows (https://www.nar.realtor/the-facts/nar-settlement-faqs):
- Written buyer agreements are now required and must meet certain criteria. Buyers and their agents will need to reach an agreement regarding how the agent will be compensated for their services and put it in writing prior to touring a home; and
- Offers of compensation (when a seller or a seller’s agent shares compensation with a buyer’s agent) can no longer be shared on Multiple Listing Services (MLS). MLSs are local marketplaces used by both buyer and seller agents to share information about homes for sale. Offers of compensation are still an option but must be communicated off-MLS if a seller chooses to make an offer available.
An important note – the above is NAR’s spin on Offers of Compensation not being allowed on the MLS. The unstated and vital part of this rule change for sellers and buyers – Offers of Compensation are no longer required to be made by sellers to buyers’ agents. This is huge, can save sellers serious money, and most certainly will be covered in future blog posts. On the flip side, however, this can cost buyers, already having to put down money on a home, pay for home inspections and surveys, and all the other associated costs of buying a home, even more money. We just didn’t want the reader starting and ending with this blog post to not be fully informed on NAR’s second point above. The rule changes are meant to eventually drive the overall cost of buying and selling a home down. Whether the savings is realized by the buyer or seller will vary transaction by transaction.
Keep reading for more in our other blog posts, and never forget:
The NEW First Step in Real Estate – Negotiate the Comp!
