A new lawsuit accusing the National Association of Realtors of anti-competitive practices could drive down commissions, push agents out of the business and have a number of other disruptive practices on the real estate industry, according to agents who spoke with Inman Thursday.
But despite the potential for disruption, some agents also told Inman they weren’t particularly bothered by the suit. In fact, some were glad it was filed.
The U.S. Department of Justice (DOJ) announced the case Thursday. In a 13-page complaint, the DOJ said that a number of NAR policies — things like letting agents say broker buyer services are free and limiting access to lockboxes — had a cumulative anti-competitive impact on real estate.
In response, NAR announced Wednesday that it was changing a number of policies. Among other things, the amount of compensation offered to buyers agents will be publicly available, a rule will prevent buyers’ agents from saying their services are free and agents will get access to lockboxes even if they aren’t members of the multiple listing service (MLS) where the property is listed.
NAR said in a statement Thursday that it disagrees with the DOJ case, but that most of the changes “seek to more explicitly state what is already the spirit and intent of NAR’s Code of Ethics and MLS Policies.”
Nevertheless, the agents who spoke to Inman said the case could still rattle the industry.
Tonia Vickery, a Phoenix-based agent with RE/MAX Desert Showcase, said one possible outcome could be that buyers start having to pay for their own agents. Many buyers may not be able to afford that additional cost, she went on to say, meaning the quality of service for buyers may actually go down.
“I think it could harm buyers in that sense,” Vickery speculated. “And probably take away a lot of buyer agency. Service has to be paid for.”
Kristi Nelson, a Sotheby’s International Realty agent in the Seattle area, also said the result of the case could be downward pressure on buyers’ agent commissions. She said that in her area, the local MLS already enacted policies to ensure that buyers know how their agents are paid. Sellers are also briefed on agent compensation, and are told that commissions are negotiable and that they can offer whatever they want to buyers’ agents.
Since those types of policies have rolled out, Nelson said she has seen buyers’ agent commissions become a “little more variable,” with some sellers offering less than the standard 3 percent.
Nelson’s area consequently offers a kind of limited case study of what could happen on a larger scale due to the DOJ lawsuit.
However, Nelson also expects agents to work harder to show why they deserve more traditional commissions, and to use buyers’ broker agreements.
“I think it will force more buyer brokers to really work with buyers’ broker agreements,” she told Inman. “To have that signed up front.”
Ken Jenny, owner of real estate consulting company tranCen, also envisions the case impacting commissions, though he said the upside could be a better consumer experience.
“This isn’t downward pressure on commissions,” he told Inman. “It’s an upward pressure on value.”
Jenny went on to say that “if you’re a buyer broker and you really want to be valuable you should be in there negotiating your fee with the buyer.” A lack of transparency has made such negotiations difficult so far, though the industry is moving in the direction of greater choice for consumers.
“I don’t see that as a bad thing,” Jenny said, adding that the new DOJ case “jams” the industry further in that direction.
The case could have an array of other impacts as well.
John Davison, owner of J. Davison Realty Group in North Carolina, told Inman that “on face value it could disempower the MLSs a little.”
He explained that right now, agents are typically required to be members of both MLSs and NAR. However, the case could disrupt that requirement, allowing agents to operate outside of those traditional organizations.
That said, Davison was upbeat about the case, saying that “I think it’s always good when it shakes things up a little bit.”
Vickery offered a similar perspective. She said that there is already some simmering discontent with NAR in the agent community over things like recent changes to the organization’s code of ethics. If suddenly people who are frustrated with NAR no longer have to be a part of it, they may well jump ship.
“A lot of people want to do business outside of being a Realtor now,” Vickery said. “This opens that up and you may have a lot of people do that.”
Davison added that the case could also ultimately thin out the ranks of the real estate industry and drive more deals into the hands of top agents. However, he added that the business is “too saturated with people right now” so it wouldn’t necessarily be a bad thing if some agents ultimately decide real estate isn’t for them.
Tyler Forte, CEO of Nashville-based low commission brokerage Felix Homes, was similarly upbeat about the case, telling Inman in an email that “we’re extremely passionate about lowering real estate commissions for buyers and sellers.”
“Anticompetitive price fixing has gone on for too long in the Realtor community and as a fellow Realtor, we should be ashamed,” Forte continued. “The solution? Either make buyer agent commissions available to the public or completely hide them on the MLS. The home buying decision should never take into account the commission a seller is offering a cooperating broker.”
Still, not everyone envisions the case wreaking major changes on the real estate business. James Sanson, a Keller Williams team leader in Arizona, acknowledged that the case could created downward pressure on commissions, but said that “at the end of the day it’s just going to evolve.”
“We’re a consumer driven market,” he told Inman. “If the cost of soda goes down is Pepsi going to make a worse product? I don’t see that happening. I see them making a smarter product.”
For that reason, and like others who spoke with Inman, Sanson wasn’t particularly worried about the case.
“This, for the most part, doesn’t bother me,” he said. “I don’t think it’s going to be anything that is an industry-breaking type of a situation.”
Update: This post was updated after publication with additional commentary from members of the real estate industry.