Changes from national real estate settlement begin this month

Jeff Parker: Buyer's agreement must now be in place before agents can show houses.

Policy changes resulting from a settlement in a case against the National Association of Realtors are set to go into effect Aug. 17.

Two key changes will be experienced by homebuyers, sellers and agents:

• Before a prospective buyer can go on a home tour, a buyer agency agreement must be signed if the real estate agent is associated with NAR.
• On multiple listing service, or MLS, sites, buyer’s agent commissions will no longer be displayed.

Jeff Parker, managing broker for Murney Associates Realtors, said his company is prepared for the changes.

“With any change, you’ve got confusion with other companies out there doing it and how we’re doing it,” he said. “There’s going to be a transition for about a month or so until everyone gets the system down.”

Murney has been training its agents in preparation for the new policies and forms, Parker said.

“The biggest thing I think that affects the public is now a Realtor has to enter into a written agreement with the buyer prior to showing them houses,” he said. “That’s a big change. Normally, buyers and agents were able to develop a relationship over showings and then decide if they wanted to work together and enter into a written agreement.”

Scott Sturm, a Realtor with AMAX Real Estate, said the biggest result of the settlement is the level of clarity in the relationship between buyer and agent.

“I have friends and past clients, and if they want to look at a house, I can’t show it without having that agency relationship spelled out,” Sturm said. “That’s a bit of an overreach in the intent of what and how our practices should be.”

But Parker said the change is not a bad one, nor a big one.

“It’s probably more transparent with the changes,” he said.

The case
As previously reported by SBJ, in October 2023, an eight-person jury found NAR and its co-defendants liable in the case Burnett et al. v. National Association of Realtors et al., which covered Missouri markets, including Springfield.

In the case overseen by Presiding Judge Stephen R. Bough in the Western District of Missouri, a jury found NAR and co-defendants HomeServices of America and Keller Williams Realty were found liable for $1.8 billion in damages. The defendants had been accused of price-fixing and collusion by artificially boosting agent commissions.

The judge approved NAR’s $418 million settlement agreement in the case.

At issue, according to a Western District case summary, were allegations that NAR had anticompetitive rules requiring home sellers to pay commission to the home buyer’s broker and that the defendants enforce those rules through anticompetitive practices.

“Plaintiffs challenge rules in both the National Association of Realtors Handbook and Code of Ethics that allegedly require home sellers to make a blanket offer of compensation to any potential buyer’s broker as a condition of listing their home on the following multiple listing services,” the summary states.

The plaintiffs alleged violations of the Sherman Act, the Missouri Merchandising Practice Act and the Missouri Antitrust Law.

Transparency
Jeff Kester, CEO of the Greater Springfield Board of Realtors, said now the consumer knows from the beginning of the process the impact agent compensation may have on a sale, although the information is not permitted on the MLS.

“The whole system hasn’t necessarily changed, other than perhaps the ease of access of that information from one agent to another is not there,” he said.

Kester said that for decades, Missouri has had written buyer agreements in place to allow buyers and sellers to know what to expect when it comes to agent compensation.

“The only real difference for those of us in Missouri is the timing,” he said. “They may see that agreement earlier in the process than they may have been expecting or they might have experienced in the past.”

Kester said there is some irony to the fact that the case in question originated in Missouri, one of the few states that already had written agreements with buyers. He added that the Realtor Code of Ethics was penned in the Show Me State.

“If there were any negative perceptions about Missouri, we’ve got that to balance it out,” he said.

Kester said the transparency provided by the written agreement will benefit customers.

“It leads to much more openness and transparency in the process,” he said. “There’s not really more paperwork; there’s more of a timing difference than anything else.”

But Kester said Realtors are in the habit of being open.

“From my perspective, and it’s a biased response, Realtors always want to do the right thing for customers,” he said. “Everyone is working together and working through these changes for the benefit of consumers, and the benefit of an industry that contributes to 17% of our gross domestic product.”

That percentage is based on more than home sales, but on associated costs of relocating and furnishing homes, he said.

That’s a process he said his profession wants to do right.

“Our goals have always been, while building successful careers, to serve people the right way and to do the right thing,” he said.

No change in cost
As the case has unfolded, some media reports have touted potential savings for homebuyers. NBC News, for example, reported that with the settlement’s approval, a standard 6% commission, split between a seller’s broker and a buyer’s agent, would go away.

However, the commission was not automatic, according to Kester.

“Compensation for Realtors always has been, is now and always will be fully negotiable between the consumer and their Realtor,” he said.

“I would say that in 99.9% of cases, consumers have gotten their money’s worth and more for what they have paid in compensation to a Realtor who may be awake at 2 o’clock in the morning, working on their behalf.”

A buyer’s agent could ask for compensation in a home offer, in which case it is negotiated as part of the contract, or the buyer could pay it outright.

“Most buyers aren’t capable of paying it themselves,” he said. “If we offer it, we’ll attract more buyers, if we don’t need to be prepared to add that to the contract.” Sturm agreed.

“It’s not going to make a bit of difference on that,” he said. “The market is what drives prices.”

He added that he believes the industry welcomes the changes brought about by the settlement agreement.

“I think the media coverage has made it seem like these things that have been going on are bad practices,” he said. “In reality, at least in my market, I’ve never experienced those.”