Will it really make a difference to the paycheck of a buyer’s agent if a judge agrees to allow a class action lawsuit to proceed? If listing agents have learned to split commissions in order to get properties shown to potential buyers by their agent, can a judgement really change that? A 2015 study found homes offering a buyer’s agent commission for less than 2.5%, took 12% longer to sell, or they were 5% less likely to sell overall. The current status quo has agents playing nice with each other, in order to meet both of their goals.
A lawsuit filed by a home seller in Minneapolis wants to shake up how much commissions are paid and shared between a listing and a buyer’s agent. If the lawsuit is allowed to proceed, it could affect the fee structures. The National Association of Realtors has filed a motion to dismiss it. NAR claims fees are always negotiable. Most agents evenly split the earned 6% commission.
The lawsuit claims anti-trust practices coming from a rule preventing buyers from unilaterally altering the commission split between the agents. The plaintiff sees a problem with how the buyer’s agent is paid by the seller, even though it’s in the interest of the buyer’s agent to get a lower price on the home.
The suit argues in a competitive market, the practice of mandating compensation to the buyer’s agent raises total transaction costs. The rule places the cost on the seller, but in a competitive market, it should be carried by the buyer. The U.S. transaction costs hover around 6%, where places like Australia and the U.K., which don’t have the same rules in place, tend to be between 1-3%.
A 2015 study found homes offering a buyer’s agent commission for less than 2.5%, took 12% longer to sell, or they were 5% less likely to sell overall.
The internet appears to have made the job of the buyer’s agent much easier, since buyers are finding their own listings on-line. However, the fees paid to their agent, have not gone down.
But, think about it. Could a judge’s ruling make a difference, if what seems to be keeping the fee structure in place may be listing agents find that lowering the commission split has resulted in their listings not being shown to as many potential buyers?
If this lawsuit is successful, it would change the way a buyer’s agent makes money, and it could lead to fewer agents in the industry.
This is one of the many reasons why the Exclusive Buyer Agency was put into place. I’ve known of agents not bothering to have it signed in fear they’ll lose the business. Any strong real estate professional will always have an exclusive agency agreement in place outlining the obligations from one party to another, no matter which side they are representing. It’s a matter of legalities and protection for the agent AND the client, and it outlines compensation clearly in black and white. So, it doesn’t matter in my opinion. As far as I’m concerned the ROI the client receives on my watch far exceeds any discount they might ask for. I don’t really have many people asking for a discount, though.