Last October 31, 2023, buying and selling real estate became more complicated. A federal lawsuit centered on whether sellers knew they were paying the buyer’s broker a commission. Commissions have always been negotiable, and commissions have varied over the years.
A Missouri jury reached a verdict against the National Association of Realtors (NAR) along with Keller Williams and Warren Buffett’s Berkshire Hathaway-owned HomeServices of America and two subsidiaries. The jury found them liable for nearly $1.8 billion in damages after determining they conspired to artificially inflate brokerage commissions for home sales. While there is much media coverage on this issue, we found the following two links to be informative.
The lawsuit centers on commissions, on average 5% to 6%, that a home seller must pay, which is then split between the seller’s realtor and the buyer’s realtor. NAR’s multiple listing service (MLS) policy required participants to communicate an offer of compensation to the buyer’s agent. While against NAR’s rules, some express concerns the buyer’s agent is incentivized to push sales with higher commissions. Years before a buyer had representation, seller’s brokers offered to pay a cooperating broker for bringing a capable buyer.
Before the jury’s verdict, NAR changed its commission rule, also known as the “Participation Rule,” to allow listing brokers to offer buyer brokers $0 in compensation when listing a home. This “decoupling” of buyer and broker commissioners will change the future of realtor commissions and buyer/seller expenses as various associations and MLS’s adjust their policies. Adding to the complexity, the Department of Justice continues to investigate during the appeal of the Missouri jury verdict and other class-action lawsuits. These lawsuits bring awareness to the commissions being paid, and we will keep watching how various markets evolve.
Our experienced real estate team at Braun & Gresham, PLLC wants to help you navigate through the complexities of buying, selling, and owning real estate.
-Patrick L. Reznik, Attorney and Counselor