The National Association of Realtors’ $418 million antitrust settlement agreement includes a component to end the practice of listing brokers setting and posting the buyers’ broker commission on the local Multiple Listing Service.
The goal is to reduce the cost of real estate sales transactions, as the U.S. has the highest transaction cost in the world. It also aims to reduce buyers’ agents from steering their clients to properties with a higher commission split for themselves.
Here’s an example: Two listed properties are on the market for $1 million. Listing 1 offers the buyers’ side 2% ($20,000) commission, and Listing 2 offers 1% or $10,000. Some agents will steer their buyers to the 2% listing only as it serves their own interests with higher compensation.
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“Projections of lower prices are totally off base. Sellers will keep the difference,” said Patrick Veling, CEO Real Data Strategies. “Falling commissions does not mean lower prices.”
Assuming the settlement is court confirmed, starting in July, buyers will be forced to negotiate compensation with the buyers’ broker for all the tasks involved in landing a home for the buyers. Posting buyers’-side commissions on the MLS will be banned.
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Houses hunters also can opt to buy directly from the listing agent, which is called double-ending.
California law requires an agent’s fiduciary duty to represent its client. As a practical matter, it’s impossible to do your best for the seller and the buyer if you are representing both sides.
“I can’t negotiate with myself (double-ending),” said Meredith Drews, an agent at Keller Williams. “Pick one agent to work with through a buyers’ broker agreement, which is similar to a listing agreement.”
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