ALERT: March 15, 2024 - The National Association of Realtors announced a $419 million proposed settlement of a class action lawsuit which alleged price fixing of commissions between Realtors representing Sellers and Realtors representing Buyers. Should the settlement be approved by the court, consumers will see huge changes with respect to how commissions and agreements among Realtors, Buyers and Sellers are handled. See more below under Real Estate Section
ALERT: March 15, 2024 - The National Association of Realtors announced a $419 million proposed settlement of a class action lawsuit which alleged price fixing of commissions between Realtors representing Sellers and Realtors representing Buyers. Should the settlement be approved by the court, consumers will see huge changes with respect to how commissions and agreements among Realtors, Buyers and Sellers are handled.
Real Estate Transactions - Buyer & Seller Representation
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The real estate industry is now undergoing one of the most dramatic paradigm shifts in its history. According to the terms of a settlement reached in a class action lawsuit brought against the National Association of Realtors (Sitzer, Burnett vs. National Association of Realtors), Realtors representing sellers of real estate will no longer be permitted to offer a commission split with Realtors representing buyers through Multiple Listing Services.
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What is Does This Mean?
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When a property is listed with a realtor, a commission figure is usually agreed upon in the listing agreement. Typical commissions usually range between 5% to 6% of the sale price. Most times, listing agents offer to split their commission with a buyer's agent when the house sells - commonly on a 50/50 basis. This is to entice buyer agents to bring prospective purchasers to the table. Up to now, offers to split commissions were typically known up front by buyer agents because they were communicated by the listing agent through Multiple Listing Services (MLSs). A buyer's agent could then be assured that they would be paid from part of the listing agent's commission after the sale. This has now changed!
Pursuant to the settlement terms of the class action settlement against the NAR, Multiple Listing Services will no longer be permitted to offer a commission split through their websites. This now puts pressure on buyer agents. It puts them in the dark, at least initially, as to how they will get paid. Will they get paid directly by the buyer (not usually the case up to now), or through a share of the listing agent's commission? They won't know. As a result, buyer agents will be forced to have a discussion with their buyers up front on this point. Under the settlement terms, buyer agents will now have to enter into a signed written agreement with buyers (although they should have all along) stating how much the buyer is required to pay for agent representation. The buyer will then have to hope that the listing agent will still offer some type of commission split to offset the fee that the buyer is being charged.
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A New Option for Buyers
This new series of developments present buyers who want representation with another alternative - they can hire an attorney who is also a licensed real estate broker. In doing so, buyers can engage someone skilled in both law and real estate. As long as a buyer wishes to pay for services, it makes sense to go this route, particularly since buying a home can be one of the most expensive purchases one makes in a lifetime.
Joe Adams is both an attorney and a licensed Pennsylvania real estate broker. As such, unlike other lawyers who are not licensed real estate brokers, Joe can participate in the commission splits traditionally reserved for buyer agents. This puts him - and you - in the unique position of possibly offsetting an attorney fee with a commission split offered by the listing agent. It is important to note that although commission splits can no longer be offered through MLSs, they still are legal and permissible - they just have to be communicated in ways other than through the MLSs. So if you are looking to engage a buyer agent in this new real estate environment, considering retaining an attorney who is also a real estate broker to represent you. Call Joe at (215) 996-9977 for more information.