Broker Commission Lawsuit

Broker Commission Lawsuit

Last month, the National Association of Realtors announced a settlement to resolve litigation related to broker compensation.

This financial settlement, and the changes that may be required by the settlement, if approved, have resulted in a lot of noise and speculation that real estate agents will become obsolete.  Having served clients for over 20 years and having purchased and sold property in multiple states, we are confident that committed real estate professionals will continue to serve clients well into the future.

Specifically, the settlement will prohibit listing brokers from offering compensation on the MLS (multiple listing service databases). It also requires agents to enter into written agreements with buyers, a long held practice in Montana. These changes must be approved by the Department of Justice before implementation is required.

Though some have believed there is a “standard” real estate commission, this has never been the case. Brokers and their clients have always had the opportunity to discuss and negotiate fees paid by a seller and/or buyer, as well as cooperative fees offered by Seller’s agents to buyer’s agents. Certain costs of a sale for staging, professional photography and marketing are also negotiable. Real estate professionals can, and often do, receive compensation for other services such as broker’s price opinions, market analyses needed for legal matters, referrals, and consulting.

Nothing in the proposed settlement changes these practices. What will change is related more to offers of cooperative compensation.

Cooperative compensation occurs when a listing broker offers an agreed upon portion of the fee paid by the seller to a buyer’s broker. This will continue to be an important component of real estate transactions. Astute sellers recognize the importance of having a real estate professional manage a buyer for their property. They recognize that a competent buyer’s agent will advise a buyer about the market, particular property features and assist in managing expectations and emotions. The less sophisticated a buyer…the more important it is to have an agent representing that buyer.  

While a buyer could compensate their agent, many buyers would have difficulty managing all of the costs of a loan, downpayment, inspections and a buyer’s agent fee. Thus, cooperative  compensation will continue to be an important option for consumers in all transactions and especially those involving lower and middle-income homebuyers. Another option may be seller concessions offered directly to a buyer, who may use the concession to compensate their agent.

The good news is that consumers will continue to have choices about hiring a real estate professional--to what degree they need advice and how they would like to compensate their agent for the services provided. Nearly 90% of all home buyers have historically chosen to work with a real estate professional, despite the availability of online information. And, 8 in 10 buyers would use or recommend their agents again.

Agents and brokers demystify the process of buying and selling a home. Seasoned agents and brokers have acquired so much knowledge that they are able to navigate very complex and unusual situations that can arise. We offer insights into property values, taxes, regulations, and zoning laws while overseeing thorough due diligence processes. And we connect buyers and sellers with other reputable real estate-related professionals such as lawyers, lenders, contractors, and inspectors–any of which can help a buyer identify significant issues or help a seller get their property sold.

Great real estate professionals are skilled negotiators and help their clients anticipate sometimes unexpected issues, ensuring appropriate planning, decisions and processes. Bad decisions become worse decisions as time passes. Real estate transactions are often the largest financial transactions of a person’s life. So, a skilled agent is crucial.

Buyers and sellers often reach out to us post sale because they have come to recognize us as trusted advisors available to help them confront challenges and questions related to home ownership.

NAR’s proposed settlement agreement and the associated changes will not change our mission or what you have come to expect of us: specialized knowledge, diligence, and a commitment to your best interests. We remain as committed as ever to overcome any challenges that may arise as a result of this proposed settlement so we can continue to serve our clients just as we have done the last 20 years.

Don’t hesitate to reach out to us with any questions about this or any of your real estate needs.


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