What the $55 Million RE/MAX Settlement Could Mean For Realtors
Watch my quick video recap!
Let’s start with the basics:
Did you know that today’s structure for real estate commissions was established in 1913? That’s right - the same year Ford began production of the Model T car.
Did you also know that RE/MAX is the second brokerage to agree to settle claims that commission tactics inflate costs for sellers?
At the heart of the issue is a NAR mandate requiring listing brokers who use a multiple listing service (MLS) to offer compensation to buyer’s agents. The suits argue that the requirement keeps commission costs for sellers unfairly high, preventing competition in the industry.
Ouch!
Will the lawsuits change anything?
A 2017 study reveals that properties offering buyer's agent commissions below 2.5% don’t fare well. Such listings linger on the market for 12% longer and have a 5% lower chance of selling at all. This shows how important it is for compensation to be paid to both sides.
Following settlements in the Sitzer/Burnett and Moehrl lawsuits involving RE/MAX and Anywhere, as well as New England's MLS PIN agreeing to a settlement in the similar Nosalek lawsuit, it's evident that there's a genuine risk of legal repercussions for commission inflation.
This threat may encourage listing brokers to exercise greater caution in their actions and foster transparency with their clients. Additionally, it could promote transparency within local MLSs.
So the answer is yes there will be a shift of some sort, although it will not come quickly. There has been no widespread immediate response to the recent settlements and it is unlikely anything will happen overnight.
What does this mean for realtors?
It may mean that many licensed agents will leave the industry. With high interest rates and low inventory, it might be the straw that breaks the camel’s back. If agents aren’t clear about their value AND their role in a transaction, they are going to see less and less transactions.
It also means that agents need to get better at using buyer representation agreements, something that NAR encourages. These agreements help clarify a realtor’s role for a buyer, and put it into writing. It will become even more imperative that realtors are able to explain how commissions are set. Agents will need to remind consumers of all the ways they help them navigate the legal, community and financial aspects of buying and selling a home.
The bottom line
As of now, the industry hasn't seen significant changes from the settlements involving RE/MAX or Anywhere. It’s not easy to change a process that has been in place since 1913.
Nonetheless, these lawsuits create opportunities for potential shifts, such as reducing overall commissions and reevaluating the responsibility for covering buyer's agent commissions.