Regarding the recent NAR verdict

The allegations:

NAR conspired with real estate firms to keep commissions artificially high. Some corporate brokers require a ‘fixed’ minimum commission percentage and the National Association of Realtors (NAR) mandates the buyer’s CoOp as a prerequisite for listing. As a result, MLS properties have an inflated ‘price-fixed’ component that contributes to the overall sales price. The plaintiffs argued that this constituted a violation of the Sherman Antitrust Act. Buyer’s remorse made it easy to gather plaintiffs for the class-action lawsuit.

My opinion about the merits:

Regarding NAR, I don’t believe that this mandated incentive is wrong. It forms the very foundation of what it means to cooperate as a REALTOR. Some association forms have a separate box where the seller agrees to pay the buyer’s broker, that was a mistake in my opinion. In our Association, LVR’s listing agreement shows the overall percentage that the seller will pay to the listing brokerage to sell their home. According to the contract, there is no mandate to pay any portion of that to the buyer’s broker. We pay a CoOp in any amount we deem necessary to fulfill our duty to sell in the best interest of the seller. I think our association got it right and the language in the LVR listing agreement will be a good example for other associations.

Below is a screenshot of LVR’s Contract language.

Below is a screenshot from our LVR MLS showing the mandated incentive.

Should we worry?

This will be appealed and tied up in litigation for a long time. Nevertheless, we should have a contingency plan.

What could result If the verdict stands up to the appeal? 

  • No more mandated commissions in the MLS: The requirement to enter a buyer’s agent commission will be eliminated. Offering a commission to the buyer’s broker will be voluntary. It will be up to the buyer to find a property with a CoOp offered to their agent or, if no CoOp is available, pay their agent at the close of escrow, either in cash or financed into the loan. This change may expose the agent to greater liability. If agents do not present all property options equally to the buyer, regardless of whether a commission is offered or not, it would be considered a fair housing violation known as ‘Steering’.
  • Elimination of a CoOp commission: It’s possible they will remove a CoOp altogether, but I doubt that will happen. As long as it’s voluntarily offered by the listing broker and not the seller, I believe the CoOp commission will remain, although voluntary.
  • Buyer Broker Agreements: We will need to rely on Buyer Broker Agreements. I expect that the LVR BBA form will include new language to clarify the possible absence of a buyer CoOp. This change will require buyers to make a more deliberate decision when retaining you as their agent and entering into a contract.
  • Dual Agency: When no CoOp is offered, buyers may go directly to the listing broker for their purchase. Buyers may question the need to pay an additional fee to the buyer’s broker when they have an alternative. In many cases, consumers will choose the path of least financial resistance, which will often lead them to the listing agent. Dual representation will become common, limiting cooperation.
  • The Nevada Real Estate Division may consider eliminating Dual Agency and the Consent to Act. This step may be necessary to prevent consumers from going directly to the listing agent to avoid retaining a Buyer’s Agent.

What changes should we expect right away? 

If immediate changes are expected, they may include the elimination of the requirement to enter a CoOp in the MLS. Offering a commission to the buyer’s broker will become voluntary. If such a change does take place, I expect the Nevada Real Estate Division will likely eliminate the Consent To act as a Dual Agent.

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