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DOJ to NAR: "cease misrepresenting that buyer broker services are free"13603

Atlanta, Georgia
DanSmigrod private msg quote post Address this user
US Department of Justice Media Release

Justice Department Files Antitrust Case and Simultaneous Settlement Requiring National Association of Realtors® To Repeal and Modify Certain Anticompetitive Rules

Settlement Will Increase Competition to the Benefit of American Homeowners and Homebuyers and Allow for Innovation in Brokerage Markets

Washington, DC. (19 November 2020) The Department of Justice today filed a civil lawsuit against the National Association of REALTORS® (NAR) alleging that NAR established and enforced illegal restraints on the ways that REALTORS® compete.

The Antitrust Division simultaneously filed a proposed settlement that requires NAR to repeal and modify its rules to provide greater transparency to home buyers about the commissions of brokers representing home buyers (buyer brokers), cease misrepresenting that buyer broker services are free, eliminate rules that prohibit filtering multiple listing services (MLS) listings based on the level of buyer broker commissions, and change its rules and policy which limit access to lockboxes to only NAR-affiliated real estate brokers. If approved, the settlement will enhance competition in the real estate market, resulting in more choice and better service for consumers.

“Buying a home is one of life’s biggest and most important financial decisions,” said Assistant Attorney General Makan Delrahim of the Justice Department’s Antitrust Division. “Home buyers and sellers should be aware of all the broker fees they are paying. Today’s settlement prevents traditional brokers from impeding competition — including by internet-based methods of home buying and selling — by providing greater transparency to consumers about broker fees. This will increase price competition among brokers and lead to better quality of services for American home buyers and sellers.”

According to the complaint, NAR’s anticompetitive rules, policies, and practices include:

(i) prohibiting MLSs that are affiliated with NAR from disclosing to prospective buyers the commission that the buyer broker will earn;
(ii) allowing buyer brokers to misrepresent to buyers that a buyer broker’s services are free;
(iii) enabling buyer brokers to filter MLS listings based on the level of buyer broker commissions offered; and
(iv) limiting access to the lockboxes that provide licensed brokers with access to homes for sale to brokers who work for a NAR-affiliated MLS. These NAR rules, policies, practices have been widely adopted by NAR-affiliated MLSs resulting in decreased competition among real estate brokers.

NAR is a trade association of more than 1.4 million-member REALTORS® who are engaged in residential real estate brokerages across the United States. NAR has over 1,400 local associations (called “Member Boards”) organized as MLSs through which REALTORS® share information about homes for sale in their communities. Among other activities, NAR establishes and enforces rules, policies, and practices that are adopted by the Member Boards and their affiliated MLSs.

The proposed settlement will be published in the Federal Register as required by the Antitrust Procedures and Penalties Act. Any person may submit written comments regarding the proposed final judgment within 60 days of its publications to Chief, Office of Decree Enforcement and Compliance, Antitrust Division, U.S. Department of Justice, 950 Pennsylvania Ave., N.W., Washington, DC 20530. At the conclusion of the 60-day comment period, the court may enter the proposed final judgment upon a finding that it serves the public interest.


Source: US Department of Justice Media Release


Your thoughts? How will the proposed settlement impact you?


USA DOJ versus NAR Complaint
USA DOJ Proposed Final Judgement
Post 1 IP   flag post
briangreul private msg quote post Address this user
This will increase price competition which will put pressure on marketing costs....
Post 2 IP   flag post
Deano private msg quote post Address this user
WOW! This is absolutely huge.

Brian, I'm not so sure that will be the outcome. Sure price competition will increase, but since buyers agent compensation will no longer be baked into each listing, it means that buyers will need to pay for service. This will lead to 'gig' based service like pay per showing. OR it means that sellers agents will need to make property that much more available OR have really immersive marketing that can only be found in virtual tours and other property content.

When it's no longer free for buyers, they are going to want to do more homework before going to see property, which means property marketing is going to be THAT much more important. Seller's agents will increasingly need to have better property marketing which will be great for us.
Post 3 IP   flag post
homefinders3d private msg quote post Address this user
Don't read too much into it. The way I read it is: NAR won't be able to require MLS's to refrain from showing prospective buyers the amount of commission the buyer broker is receiving.

Buyers agents will not be able to filter out listings by commission amount. Realtors will have to explain that they get paid a part of the listing commission and so it's technically not free. Non association member agents will have access to e-boxes.

Agents will still have to hang their license at a brokerage. Brokers will still set the amount of commission that an agent can charge. I'm not sure how it will open any gig work.

Most every state requires that a licensed agent show must show a property. There is already a means for gig work on the buyers side to some extent: showing assistants.

In my brokerage busy agents or teams offer showing gigs for about $40 per showing plus 10% of the commission if the person they show the home to makes the purchase.

I don't of any agents that filter their listings by commission rate. It's not even a default field in either of the MLS's I belong to. Most agents want to sell the right home to their client as fast as possible. Limiting the number of listings your are going to show to your clients is counter-productive.

I also am not sure how it will make the market more competitive. The real key IMO(pun intended)is access to e-boxes by non NAR members. right now you have to be member of your local association to get access to the e-boxes.

For me that means I have to be a member of two MLS's at a cost of around $1500 a year. Plus about $40 a month for the key apps.. I can see the e-key companies like Supra and Sentrilock charging extra for non-association members. But still cheaper.

The one area it will make it more competitive is with online based brokerages. There are very few buyers that are not aware of the fact that buyers agents get paid from the listing fee and that the listing agent sets the amount the buyer agent receives.

No where does it state that buyers will have to pay the buyer agent. It simply states that a buyer agent has to disclose to the buyer that they are receiving part of the commission from the sale. It is technically not a free service, just not being paid directly by the buyer.
Post 4 IP   flag post
homefinders3d private msg quote post Address this user
Here is what NAR announced today: "In accordance with the MLS system’s long-standing focus on creating an efficient, transparent marketplace for home buyers and sellers, the amount of compensation offered to buyers’ agents for each MLS listing will be made publicly available.

Publicly accessible MLS data feeds will include offers of compensation, and buyers’ agents will have an affirmative obligation to provide such information to their clients for homes of interest.

Relatedly, the rule changes re-affirm that MLSs and brokerages, as always, must provide consumers all properties that fit their criteria regardless of compensation offered or the name of the listing brokerage.

While NAR has long encouraged buyers’ agents to explain how they expect to be paid, typically through offers of cooperative compensation from sellers’ agents, there will be a rule that more definitively states that buyers’ agents cannot represent their services as free to clients.

Finally, with the seller’s prior approval, a licensed real estate agent will have access to the lockboxes of properties listed on an MLS even if the agent does not subscribe to the MLS."
Post 5 IP   flag post
Deano private msg quote post Address this user
In 1 year after this take shape, 30% of the listings on the MLS will have little or no buyers agent compensation. Why would you offer buyers comp when the audience will be EXACTLY the same whether you offer one or not.

Buyers are now going to have to choose to sign a buyers agreement for a certain percentage that they will be responsible for or they will pay by gig, which will be MUCH more economical.

I don't have to read into it -- This is going to slash margins and property marketing is the easiest way to reduce the amount of drama (and cost) of touring homes. Once sellers realize they can pay just 3% and get the same service, they'll never look back.
Post 6 IP   flag post
Deano private msg quote post Address this user
BTW, thanks for the heads up on this Dan, WGN was the one that delivered the breaking news to me today!
Post 7 IP   flag post
homefinders3d private msg quote post Address this user
@Deano Most buyers sign a single agency or transaction broker agreement now and the agreement usually tells the buyer how the buyers agent will be paid.

None of that changes. My Alabama contracts actually tell the buyer that if the seller doesn't pay the commission, the buyer will be responsible for it.

That never happens, but it is there. Nowhere in the settlement does it state that buyers will now have to pay a buyer agent fee.

It just states that the buyer has to be informed by the broker/agent that there is a fee being paid and that it is coming from the listing fee.

The audience is the same now whether you offer a buyer commission or not. The commission is offered to compensate the buyer agent for writing the contract etc..

A buyer that contracts a buyer agent is still going to receive the services rendered with no out of pocket expenses. The way the MLS works now, every listing agent can set the amount of commission paid to anyone that brings a buyer to the table.

It's not uncommon for there to be various levels of commission listed based upon who brings the offer. It is very common for a Non-Rep agent to receive 1% or less commission. Right now an agent can filter the listings that they want to show to a client based upon the amount of commission the agent will receive - the settlement removes that ability.

That prevents the agent from hiding a listing just because it has a low commission. When an agent sends listings directly from the MLS to a client/clients, the agent is forbidden by the MLS from sending an agent facing listing that shows the compensation amounts - the settlement stops this practice. If a seller is going to base their listing solely on the amount of commission paid, they are probably going to go FSBO.
Post 8 IP   flag post
Deano private msg quote post Address this user
I can tell you NOONE signs those in our market. "It's in there, but it never happens" Even in your market when they start getting hit with 2.5% unexpected closing costs they will no longer sign them in your market either. Buyers are not stupid.

The audience is the same now whether you offer a commission or not. Then why can members of every MLS in the country filter their clients screen results by commission amount? Why have there been studies that show that buyers agents filter these and hide listing that they don't think are fairly compensating them? Have you ever left a Help U Sell listing off of todays tour? If you don't think agents routinely filter listings by commission, then you are the only one not doing it.

They don't need to go FSBO because they will just buy gig services. $1,000 to draw up a contract, etc. Like it or not, all of this becomes MUCH more likely now that this has happened. When I roll in with a 2.5% commission to your 6%, who will win. Like I said, once sellers realize that they don't need to pay the buyer's agent, many of them will never look back.

Here is my only question about the DOJ action. Can a real estate broker who is not affiliated with any MLS still gain access to lockboxes? If that is true, then MLSs are 'dead man walking'.
Post 9 IP   flag post
Atlanta, Georgia
DanSmigrod private msg quote post Address this user
Inman (20 November 2020) Agents envision potential shakeup from DOJ-NAR lawsuit - Among other things, the case could ultimately drive down commissions and weaken industry organizations, agents told Inman

"A new lawsuit accusing the National Association of Realtors of anti-competitive practices could drive down commissions, push agents out of the business and have a number of other disruptive practices on the real estate industry, according to agents who spoke with Inman Thursday," says Inman.

I encourage you to subscribe to Inman.

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Post 10 IP   flag post
thephilm private msg quote post Address this user
They just effectively gave brokerages like REX they keys to the kingdom.

It looks like the goal here is to replace buyers agents with a webpage. We're going to see a general eroding of the buyers agent and will see less and less commission offered.

Brokerages like REX and even Zillow as they ramp up will be able to pay hourly, or gig works style per showing. These brokerages just got the backing of the DOJ to sue brokerages who don't show their homes because of "low commission" for buyers agent. This is a slippery slope but I do honestly believe we'll see 2+ percentage commissions for buyers agents gone within 2 years.

To put it in perspective - when you earn .5% on a 300k house and you have to put in 80-100 hours of work (plus gas / etc.). Let's just do the math:
300k house @ .5% = $1500
Broker split (let's just say you're at an 80/20) leaves you with $1200.
Now let's take off 30% for taxes. and you are left with $840.
Let's say you put 80 hours into the whole thing, showing homes, preparing offers, appraisals, walkthroughs, contingency updates, therapy sessions with your client etc.
That's about $10.50 / hour. What's the point?

Getting the "standard" 2.5% commission nets you about $4200 for that same home. We're going to see a lot less buyers agents and the burden of finding a home will fall on the home buyers using digital tools.

What does this mean for us as photographers?

If anything, this could be a good thing. There will be more focus on marketing and getting the listing out there looking good.

I think we'll see an even higher adoption of virtual tours, higher end photos, listing websites etc. There will be a greater emphasis on the sellers agent advertising and finding buyers and so they'll have to do more than some iPhone shots.

Very likely brokers will be more involved in the marketing so now is the time to work more directly with a brokerage than individual agents.
Post 11 IP   flag post
Expertise private msg quote post Address this user
Always remember, real estate is local. Close to ZERO buyers sign single agency/buyers brokerage agreements in this area.

Originally Posted by homefinders3d
@Deano Most buyers sign a single agency or transaction broker agreement now and the agreement usually tells the buyer how the buyers agent will be paid.

Post 12 IP   flag post
dave3d private msg quote post Address this user
Personally I hope this doesn't mean lower commissions for agents.

I'm afraid we're moving to "super brokers" like Zillow who have employees.

Good agents, I don't mean most agents, I mean good agents.... provide a huge advantage for the buyer and the seller. I've seen good listing agents getting all the marketing done, trimming the trees and shrubs, putting in under counter lighting, working with contractors, etc, etc, etc. In some cases putting in huge numbers of hours while acting as a negotiator and peace keeper between less than hospitable buyers and sellers. I've seen them prevent losses on mechanicals, not let sellers pull their homes off the market for "less than real" buyers, catch gotchas in contracts, etc., etc., etc. Same thing on the buyer side - long hours "being there" getting homes ready for out of town buyers before move in, etc.

On the "will it be good" for MPs? Try an "I Doubt it"..... D.

Seeing their world diminish is sad to me. I think they more than earn the amount they get paid. And that money gets pulled away piece by piece by anyone who can get a hand into their pocket. Buying signs, buying locks, paying for E&O insurance, office space, MLS fees, it doesn't stop.

I'm not an agent and have no desire to fight that battle. That said the good ones have my respect and admiration. But looks like we're experiencing yet another siesmic shift as technology and capitalism march on.
Post 13 IP   flag post
homefinders3d private msg quote post Address this user
For the record, I have two RE licenses, but I don’t make a living doing RE. Access to the lockbox is the game changer imo. Time will tell. It’s normal business evolution. It’s just like MSP providers complaining about agents shooting their own tours etc. As business owners we adapt, compete or get out lol.
Post 14 IP   flag post
Deano private msg quote post Address this user
There are 3 parts to selling a home.

1. Marketing (agents really have no business in this aspect) With this change, we can reclaim it and demonstrate our value to sellers. Agents don't really value us and if a client would be happy with them doing photos with their iphone, they'd cut us out in a heartbeat. Many of them already do even though it makes them look bad!

2. Audience - this is where the monopoly exists. By opening up the listings to any licensee, everyone now has the same audience. Consumers will see ALL listings now regardless of buyers agent comp.

3. negotiations, contract and close. This is where the agents value lies. This will never be replaced. like @expertise said "All real estate is local"

In the past, agents collect 6% and take credit for all of these things. That ends here. Now, the services provided by an agent will be decoupled and we are the first step in the process of selling. Wouldn't a world where your work impressed sellers directly and you didn't have to suck up to agents be a nice place to be? Welcome to the new way of doing business!

I can't wait!
Post 15 IP   flag post
briangreul private msg quote post Address this user
A few thoughts...

1) A friend who was an agent and then a broker, and now is a property flipper/investor was doing 1% listings back in the 1990's. He made some good money doing it and converted a number of FSBO's while pissing off the commission focused set. He had a variety of models including 1%/3% and many other creative things. Nothing new there.

2) I do believe Zillow, Redfin, etc are behind this. The last thing they want is having their listings filtered because they pay $50 to the buyer's agent or being required to join every MLS in the nation to get their agents access to lockboxes.

3) Required to provide access is not the same as "access at the same terms and rates." You can rest assured that ML$ will find a way to monetize non-member access. In the association world, which is what all the MLS actually are and what NAR is... it's common to sell the conference ticket for $x to members and $X plus membership to non-members. Look for a similar SUPRA fee.

4) Agents are already cheap when it comes to photography and tours. Market is hot where I am now. Although I see that changing, seems like every 5th house just went on the market this last month. But anything turn-key has been flying off the market in days, usually single digit or low double digit. Fix-up and problem child properties and over-priced are languishing... nothing new there. So if you have a hot property and can get away with TracPhone photos... why not? It's going to sell for list anyway. Reduced commissions will move the bar lower for who invests in marketing their properties and who doesn't. I don't blame agents either. This is good business and they carry marketing costs whether the house sells or not. If the seller is being obstinate and won't adjust the price or make needed repairs they may lose the listing after the agreement expires in 6 months. Why sink money into something that isn't going to sell? Most agents are not Ms. Money Bags... and the successful ones didn't get there by engaging in excess spending.

My prediction is that this is just another step in the much-needed market correction for settlement service providers. Agent commissions will come down a little, especially for higher end properties. It may narrow the market a little for Matterport... but honestly Matterport is doing more to narrow the market than this will. Matterport aggressively markets to agents, scooping the frequent users. They go after the commercial heavy users, scooping that market. We can all sit around and cry about the lemons or we can find new uses for lemon juice and make money elsewhere.
Post 16 IP   flag post
Expertise private msg quote post Address this user
I'm not good at crystal ball gazing... but I'd guess MLS/Associations will attempt to recoup lost Realtor fees thru lockbox subscription fees. But then agents will just move to non Association lockboxes. I'm sure someone makes a non Supra secure lockbox solution right now.

Once the commission is public and lockboxes are non-MLS, what do we need NAR for?
Post 17 IP   flag post
briangreul private msg quote post Address this user
Yea non-Supra lockboxes have been around for a while...

Btw, I had to remove a lock box and recover the key one time. Took me about 3 minutes to break it open. It was an old combo-style Supra box.

There will always be FSBO's and price focused clients.... I don't think it's as big of a win as some do.

Bank's still have tellers despite the ATM, and we still have postal workers despite e-mail and fax.
Post 18 IP   flag post
Atlanta, Georgia
DanSmigrod private msg quote post Address this user
Inman (20 November 2020) The DOJ-NAR lawsuit is good for us all -
These changes don't spell the end of anything. They provide consumers with information. Transparency, protecting your clients' interests and codifying best practices are all good things


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Post 19 IP   flag post
Atlanta, Georgia
DanSmigrod private msg quote post Address this user
Inman (19 October 2021) DOJ to NAR: Increased competition could save consumers billions | In court filings, regulator says rules 'restrict how real estate agents can market properties, dictate how real estate commissions are set, and impede commission negotiations'


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Post 20 IP   flag post
Atlanta, Georgia
DanSmigrod private msg quote post Address this user
Originally Posted by DanSmigrod
Inman (28 April 2022) 'Brain exploding!': Agents, brokers torn over commission suit ruling
| Agents and brokers told Inman they're reeling over a federal court's decision to grant class action status in a commission suit that could rock the real estate industry by changing how they're paid

Hi All,

Excellent article (above) about:

Inman (27 April 2022) Federal commission suit now a class action; NAR, Realogy vow to appeal
| Days after oral arguments, a judge Friday granted class certification in 1 of 2 federal commission suits that could rock the real estate industry and impact how agents are compensated nationwide

I encourage you to subscribe to Inman.

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Post 21 IP   flag post
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