As many of you have heard the National Association of Realtors (NAR) has settled.  If you are not familiar with the suit, that’s OK.  While the suit is complex, affecting national, state, and local law, here is the gist:

For years sellers have been told the commission rate to sell their home is 6%.  Typically, the commission is split between the listing agent (representing the sellers) and the buyer’s agent in a sub agency arrangement.  What many do not know is the rate is, and always has been, negotiable.  Having a set commission rate violates antitrust law and could be considered price fixing.  Many sellers were not informed the rate is negotiable, nor were they told they are not required to include buyer’s representation.

Prior to the 1990’s buyer representation did not exist.  Essentially every Realtor worked for the seller.  Many homebuyers were not informed of their rights or educated about federal, state, and regional laws.  Buyer representation began to protect the buyer’s best interest.  It also streamlined the home sale process for both parties.

When a Realtor represents both sides of a transaction, it is called (in Virginia) dual agency.  Dual agency is akin to having a coach for two opposing teams on the same field.  It is unlawful in many states and prohibited by some brokerages in others.  Buyer agents bring the prospects to the home and help their clients with the purchase.  They bridge the gap between their buyer’s goals and the options available.  The commission rate was split to compensate for this function of the sale.

This arrangement has begged many questions, hence the lawsuit.  For instance, if the seller is paying the commission from the proceeds of the home sale.  Why are they “paying for” buyer representation?  The seller has been required to agree to the rate and splits prior to listing the home.   Are buyers paying higher prices for homes to compensate for this expense?

We, Realtors, learned about the settlement in the news, at the same time as everyone else.  It will take some time to see how this could/will impact the home sale process and the financial implications.  In a nutshell, NAR works at a national level to protect consumers and real estate professionals.  It established ethical standards for the profession, influences legislation, and provides and regulates continuing education.  Virginia also has an association, Virginia Realtors (VAR).  It provides many of the same functions according to the Commonwealth’s laws.  The regional associations, Northern Virginia Association of Realtors (NVAR) being the most prominent, help determine how to implement the processes and regulations into practice.

Many of the tools we use to do our job require membership of all three associations.  The decisions made at every level affect what we do and how.  Until the impact of NAR’s decision reaches the state and local associations and if/when brokerages adjust their models, the result of the settlement remains to be seen.

There is a lot of speculation about the future of home sales and that is all it is...speculation.  Many people presumed the real estate market would collapse when the pandemic hit, and they could not have been more wrong.  We navigated those challenges, and we will again.  If you are comfortable with some ambiguity for the time being there is no need to postpone your goal whether buying or selling.

I am happy to expand upon any of the information I have shared, explain the intricacies of commission in greater detail, and share my opinion about it all.  All questions welcome!