Beacon Group Real Estate

People are Buzzing about Commissions – But What Does it Mean for Me??

Disclaimer: This is completely my opinion about how I see things today. There are lots of unknowns and we are all trying to learn about the situation and create a better situation for the clients in the future. Written by Stephanie Ford 3/20/2024

What’s up with the commissions lawsuit thing? How does that affect you? Me? Real estate?

People are asking me every week (day)? I am flattered and touched to see friends and clients as concerned about my real estate practice as they are about their deals and the industry.

Things are VERY fluid right now. Lawsuits are being filed. Lawsuits are being settled. Settlements are being thrown out. Individual real estate brokerages are proposing settlements to their individual lawsuits. People are looking to bundle lawsuits.

The National Association of Realtors® (NAR) and the Department of Justice (DOJ) are rewriting policy and looking to drastically change the real estate industry.

I have friends working at the national policy level with NAR telling me the organization and the industry will be unrecognizable next year. The press is everywhere.

Am I part of the problem? (AITA?)

With my practice and my clients, I don’t see reality changing very much. My first thing I have to ask by having that posture is…does that make me part of the problem? Does that make me the issue that everyone is looking to resolve?

When I talk to my clients and tell them how I see the old and the new, I feel strongly that we have done the right thing for our clients from the beginning. We work with our clients to do the thing for them that we would want someone telling us to do for us.

My goal with clients from the beginning has been to measure their success with a 15-year look back, and as my practice gets older, I believe that timeline does, too.I will watch closely to hear the issues at hand, to see the changes that will be implemented, and always do the best things for our clients.

Commissions have always been negotiable

The current, or “old” situation, is that a real estate sale often generates a commission. The amount of the commission is frequently decided between the seller and their listing agent.

That commission is negotiable. It is optional. Paying the buyers’ agent commission is optional. The amount is negotiable. Sometimes the buyer chooses the commission and amount. This has always been true.

In any industry, price fixing will get the attention of the DOJ. Are there agents and brokerages anywhere in the US who practice price fixing or have other problematic practices?

Maybe there are. And I am glad to see scrutiny and correction coming.

Have I practiced price fixing and coercion in commissions? I don’t believe so. We believe we offer clients marketing and sales services whose value far exceeds the commissions paid. Always, we stay within solid legal and ethical practices.

We sit with each buyer and seller and discuss commissions, which services are included, and when a commission might be higher or lower than their expectations coming into the conversation. We deliver results to our clients far beyond the cost of the commissions.

Buyers always pay the commissions

The thing that isn’t always obvious is that all commissions are paid by the buyers. I may see more nuance to this as the settlements and the new descriptions of services rollout. A lot of commission decisions are currently made by the sellers. Maybe that is the heart of the issue. But.

When the buyer purchases a home from a seller, the buyer brings all of the money to the table.

That money is distributed to lots of places. To the sellers’ mortgage, to the title insurance company, to the county, to the state, to the attorneys, to the city or town, to appraisers, to lots of people. And to the commissions.

No matter which side of the paper, the buyer side or the seller side, lists the services, the money from the buyer pays those bills. For example…the buyer pays off the seller’s mortgage. It sounds weird to say it that way, but that is true.

These things aren’t going to change. Where the amounts are written, buyer column or seller column, and who most often decides the amount might shift. But the reality is that the money to pay all of the bills comes from the buyer.

What is going to change right away?

Right now with sellers, we present the services we offer and the fees we charge for each level of service.

The seller decides the services they are buying and what they are paying.

Buyers work with us knowing that our commission is paid from the transaction. Whether that commission is paid by the seller or paid by the buyer is “paperwork”.

The buyer is already paying for everything.

I will come back with pieces about how this might look in the paperwork for both buyer and seller. The first changes are going to be paperwork and the words we use to describe the services.

For people in real estate deals this year, or any time, I encourage you to work with agents who are experienced, knowledgeable, and clearly represent your best interests. When those services are performed well, the value is much greater than the cost. I don’t currently see what difference it will make in the long run about which side of the page they are written on.

In the short term I worry that, as with many professional services like accountants or attorneys, the more experienced, more savvy, better-funded clients will better utilize real estate services. Therefore, this might mean that it will become more difficult for less experienced or less well-funded clients to engage the best options for the services they need, or to be fully aware of what they need and what is available.

I am working to make sure my clients continue to have what they need.

More to come.

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