Could Legal Verdict Change Commissions?
By Jim Palmer Jr.

 A jury recently handed a loss to the National Association of Realtors® in a case where the complaint states that the NAR conspired to inflate commissions.  According to Kate Gibson of MoneyWatch, “the ruling will likely lead to greater transparency, long a source of confusion and frustration for consumers about where their money goes in real estate transactions.”  She further claims that, “Home sellers have long grumbled about having to pay commissions to a buyer’s broker.” Plaintiffs in this case argued that, “If not for MLS, buyers would compensate their own agents, as would sellers.”  This case is currently being appealed.

More recently, a plaintiff filed an antitrust lawsuit in South Carolina against NAR and Keller Williams, alleging they colluded to inflate agent commissions.  The plaintiff erroneously asserts that, according to NAR rules, “seller must pay the buyer brokers compensation” and, “NAR rules effectively take the compensation structure out of the view of the buyers and sellers, masking who pays the buyer broker’s compensation.”

It is true that the vast majority of U.S. homes are bought and sold through real estate agents affiliated with NAR and who belong to a Multiple Listing Service.  It is NOT true that NAR requires home sellers to offer a non-negotiable commission. Commissions have always been negotiable, just like the price of a home is negotiable.  In fact, in the Spokane Realtor® owned MLS, sellers can still list the property even if they offer zero to a cooperating broker.

In a recent local case, a seller who had signed a contract with a broker to pay a full commission, heard the news about these recent lawsuits and then attempted to modify that agreement when a buyer began negotiating for a sales price that was lower than the listed amount.  He asked, “Why should I have to pay the buyer’s broker commission?”

The truth is he doesn’t have to pay the buyer’s broker, BUT most buyers don’t have the additional cash to pay a broker and therefore could never come to the buying table without that offer to compensate.  That is why market pressure has created the current business practice. 

Consider this thought also; the sold listings used by MLS brokers to help establish listing prices obviously include a commission.  That means the value of a property isn’t really the sales price.  It is the sales price minus commission and minus concessions the seller paid for the buyer’s loan costs or even the garden tractor that stayed. 

Negotiating commissions may sound fashionable, but when reality sets in, brokers won’t work for free. Sellers and buyers will continue to pay for that necessary and valuable work no matter how it is structured.