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The Sitzer|Mail lawsuit settlement and NAR’s new rules have caused confusion, controversy, and conflict among the residential real estate industry and its critics. All of this because no one was completely satisfied with the terms of the settlement, and the class action lawsuit ended up opening a Pandora’s box of issues that went far beyond the separation of listing agent and buyer agent commissions. is not surprising.
All these issues are too numerous and complex to cover in a short essay, but they do reveal tensions that can be discussed.
Some, both on the industry and critics side, see this change as an unmitigated disaster. One commentator called the settlement an “unmitigated disaster.” However, one industry leader accused class action lawyers of “recklessly destroying proven courts while causing chaos and chaos.” [real estate] process. ”
However, most industry leaders and industry commentators now believe that this settlement, along with the lawsuit itself and the jury’s decision, represents a compromise that will benefit and challenge change for both real estate agents and consumers. I am aware of this.
The benefit for the industry is that despite revelations of systematic price rigging and adverse jury decisions, real estate agent groups collect nearly $100 billion in fees each year; You will have to pay a one-time penalty of less than $1.
Additionally, the settlement does not prohibit sellers from offering to pay buyer agency fees, an outcome sought by most critics, including the U.S. Department of Justice.
The benefits that exposure and jury decisions bring to consumers, while also presenting challenges for the industry, include:
The removal of forced pricing will allow buyers to negotiate their agents’ fees, reducing pressure on sellers to provide compensation. In doing so, the settlement would effectively nullify remaining anti-kickback laws in nine states. Public exposure of widespread price rigging would certainly encourage many prospective buyers and sellers to discuss and negotiate commissions for both listing agents and buyer agents. A more real and recognized selling and buying alternative to traditional intermediaries. According to RISMedia research, there is already evidence that less experienced part-time agents are less able to charge commissions of 2.5 to 3 percent. Many industry leaders and commentators also believe that alternative brokers have new opportunities to gain market share.
However, consumers will also have an obligation to more actively select their agents and negotiate their agents’ compensation in markets where the industry is less regulated.
The confusion stems from new real estate agent rules that require buyers to sign a contract before showing a property agent a viewing. These contracts, at least those proposed by state real estate agent associations, are very long and legal, making them difficult for both agents and consumers to understand.
In addition, most contracts also contain anti-consumer clauses, including timing of signing, which does not give the buyer a sufficient opportunity to evaluate the agent before signing the contract.
While “tour contracts” are helpful, they do not adequately address the issues raised by this requirement. All of these contracts will increasingly be compared to easier-to-read and more fair contracts, such as those developed by eXp and Northwest MLS.
This lawsuit and settlement has created a Pandora’s box for the industry that also affects consumers. These issues have always been present, never fully released, but include fundamental challenges to the role of NAR, MLS, and portals.
These include greater opportunities for sellers who wish to sell on their own or who wish to purchase limited brokerage services. And that includes brave government regulators and private litigators.
The Justice Department was emboldened to be more publicly critical in the wake of the lawsuit and jury decision. In its recent refusal to approve the settlement, it was clear that the Department of Justice believes that new industry rules may be necessary, but are not sufficient conditions for sufficient price competition.
The new administration may be less aggressive, but the Justice Department’s more than 80-year commitment to making the industry more competitive is unlikely to disappear. Additionally, there is some evidence that state regulators will be more proactive in addressing related issues, often siding with many industry leaders who believe that some changes are necessary or desirable.
It is often discussed that private litigation is increasingly challenging broad industry practices. Some people try their hand at Sitzer. The mail village itself. I think most of these challenges will fail or have only marginal success.
This settlement represents, on the one hand, a serious five-year effort by the largest and most successful class action law firm, and on the other hand, most efforts to minimize potentially devastating damage to the industry. represents an initiative by industry leaders.
Furthermore, there is every evidence that Judges Mehr and Sitzer handled these two cases competently. Unless many real estate agents ignore the terms of their contracts, I doubt there will be any significant legal challenges to the industry in the future.
This industry’s actions are one of the two factors that I believe will have the greatest impact on its future. Another factor is consumer behavior. The more often homebuyers and sellers question and challenge their agents about practices and coverages, the more all consumers benefit.
I and other critics intend to encourage these questions and challenges, and to offer suggestions about the most productive ways to raise both.
Stephen Brobeck has been studying residential real estate brokerage issues since the early 1990s. Initially, he focused on subgency. More recently, he has researched issues related to agencies, agency compensation, and state regulation. Brobeck received his Ph.D. in American Studies from the University of Pennsylvania and has taught at several universities. From 1980 to 2018, he served as executive director and CEO of the Consumer Federation of America. Since then, he has held the position of Senior Fellow.
