NAR Settlement: Impact on Realtors & Consumers
They say Real Estate is the most primitive industry yet this new Settlement is only taking us further by repeating poor environments of the past.
What is going on everyone! Are you ready to put on your Baby Tees, Bike Shorts and Bucket Hats? Because that is where this recent settlement is taking us and I will explain better further on.
Real quick, thank you so much for tuning in again to our second trending blog! Don’t forget to check out our first blog on War & Real Estate to prepare yourself for WWIII.
Anyways, let’s get started with the reason you clicked on this article, which was due to all the trending and Clickbait headlines that have been reproduced by starving media companies who are desperate for any form of views and clicks as their industry dramatically declines.
Let’s dive into the buzz around the NAR antitrust settlement.
The Billion Dollar Antitrust Allegations: A Closer Look
In October 2023, a Missouri jury found National Association of Realtors, Keller Williams, and HomeServices of America liable for anti-competitive practices, resulting in a $1.78 billion penalty. However, on March 15, 2024, NAR proposed a $418 million settlement over four years. Despite not admitting wrongdoing, NAR aims to adapt to market demands and proactively address the issue. They believe this approach is the best strategy to navigate the situation and maintain industry stability, even though it goes against the “Never Settle” mantra advocated by figures like Mark Cuban and Brian Tracy.
Settlement Dynamics: Analyzing the Decision to Settle
Settling a legal dispute isn’t about surrender; it’s a strategic choice. Did you know about 95% of civil cases settle? Take the famous $3M McDonald’s coffee case—settled for $600,000 to avoid prolonged legal battles.
In Missouri, NAR’s $1.78B penalty led to a $418M settlement proposal. But why settle?
Here are the options:
Appeal the Ruling: Winning estimated at $5.6B but costly. Risked “copycat cases” nationwide and member dues hike.
Bankruptcy: Seen as dishonorable, against Realtor ethics.
Settlement offers nationwide release of liability, preventing further financial harm to Realtors. It’s about strategic maneuvering, not defeat.
Choosing to settle now was about cutting losses, staying nimble, and protecting members from even heftier financial hits.
It’s a move that says, “We’re here to fix things, not fight over them.”
Now, let’s talk about who’s really feeling the heat from this settlement.
Will REALTORS® be hit the hardest?
The fallout from the settlement isn’t sparing anyone, especially veterans and consumers. With V.A. Loans no longer covering commissions, over 21 million veterans face hurdles in home buying. Consumers now navigate more paperwork upfront, lessening the romance of property tours but ensuring transparency.
REALTORS® face seismic shifts too. No more “working with me is free” pitches; upfront payment disclosures become the norm. Those unable to prove value risk walking away empty-handed—a tough pill for industry veterans.
The lawsuit’s origin in Missouri doesn’t mean every REALTOR® is targeted; the settlement aims to prevent endless legal battles nationwide. And contrary to myth, sellers rarely paid the buyer’s agent before, akin to buying a car without paying the salesperson directly.
Commercial brokers remain unscathed, conducting business as usual amidst the upheaval.
Clearing Up the Settlement Confusion
Let’s dispel some myths surrounding the settlement:
Realtors Engage in Price-Fixing – MYTH! Price-fixing isn’t a Realtor norm; it involves secret arrangements, unlike typical real estate practices.
The Lawsuit Targeted All Realtors – MYTH! It addressed specific policies, not every Realtor. The settlement aims to prevent nationwide legal battles.
Sellers Always Paid for Buyer’s Real Estate Agent – MYTH! Sellers rarely paid buyer’s agents directly. It’s akin to paying a car salesperson out of pocket.
Realtors Always Charge 6% Commission – MYTH! Rates vary; discount companies like Redfin exist but often rely on unsustainable debt.
Real Estate Commissions Were Never Negotiable Before 2024 – MYTH! Commission negotiation has always been an option. Even President Biden got it twisted in a speech [in Las Vegas, 5:23], but hey, everyone makes mistakes, right?
Pricing Houses Will Now Drop – MYTH! Sellers aim to maximize returns, not necessarily drop prices due to the settlement.
Agents Representing Buyers Push for Higher Prices – MYTH! Pushing prices doesn’t significantly increase agent earnings; it risks future referrals and long-term client relationships.
Real estate thrived before buyer agents; trust, repeat business, and referrals drive long-term success.
Which makes you wonder, how did Real Estate work before Buyer Agents existed?
Flashback to the 90s: The Dawn of Buyer Representation
In the 90s, buyer representation transformed real estate, offering crucial support to previously marginalized buyers. Challenges arose in 2020 when commission-filtered MLS listings were linked to unfair practices, leading to its removal nationwide. Mandated by NAR in 2021, buyer agent commission disclosure aimed for transparency but sparked concerns about client prioritization. In 2024, there’s a push to remove this disclosure, reflecting ongoing industry debates. Amidst trial and error, the focus remains on defining homeowner wins beyond nominal settlements. Balancing transparency with client-centric service remains a key challenge in navigating the ever-evolving real estate landscape. (source: CFA)
How the Settlement Reshapes Business for Residential Realtors
The settlement presents a paradigm shift for residential realtors, prompting strategic adjustments to their business models. Some brokers may curtail representation and liability to offer reduced rates, necessitating signed agreements before any service provision. In response, brokers might steer buyers towards homes with offered commissions or levy additional fees for representation. Despite MLS compensation bans, alternate marketing avenues may showcase offered compensations. Property websites could emerge as platforms for compensation negotiation, mirroring practices seen in off-market residential and commercial sectors. Sellers may advertise covering closing costs to compensate buyer representatives, unaffected by FHA statements ensuring buyers’ credit eligibility. Seller representatives may exclude upfront buyer agent commissions, introducing variability into each of offer.
No Comments