Shaun Minnie, entrepreneur and CEO of on-demand real estate services platform Blok, shares his take on the National Association of Realtors (NAR) settlement proposal in the class-action antitrust lawsuits revealed Friday, March 15, 2024.
As the winds of change sweep through the real estate industry, the recent proposal by the National Association of Realtors (NAR) for a settlement in class-action antitrust lawsuits has sent ripples of apprehension and curiosity among real estate agents and brokers alike.
This proposal, long anticipated since its inception pre-2019, signifies a seismic shift in the landscape of real estate transactions. While uncertainty looms, it’s imperative to acknowledge both the challenges and opportunities that lie ahead.
The proposed settlement, subject to court approval and expected alignment with the Department of Justice (DOJ), introduces a fundamental transformation in the compensation structure, urging sellers and buyers to independently determine agent compensation. This departure from the traditional MLS compensation system signals the start of all buyer agents being mandated to secure written agreements before showcasing properties.
Financially, the settlement entails substantial payments, with NAR pledging approximately $418 million to the plaintiff fund over four years, alongside a further $208 million in contributions from three major firms. Yet, amidst these fiscal commitments, there’s reassurance that NAR doesn’t intend to levy additional fees on its members in 2024.
The scope of the settlement is intended to cover midsize and small brokerage companies, notably excluding high-volume brokerage firms, which face separate terms, namely a settlement offer of 25 basis points of their average transaction volume over the previous four years. (High-volume is defined as above $2 billion in this instance.)
The realtor associations are expected to create standardized forms to ensure consumer clarity and ease of understanding. Changes, including modifications to agreements and forms, are expected to be implemented by mid-July.
What does this mean for real estate agents?
For real estate agents, the implications are significant. The shift demands a re-evaluation of practices and a proactive approach to adaptation. With the MLS commission field slated for elimination, the emphasis now falls on securing clear, negotiated buyer representation agreements detailing what the buyer and buyer’s agent have agreed before property viewings.
You should know that this agreement must be signed before you show a property and are given permission to enter it. The right and opportunity for a seller to fund the buyer’s representation compensation or a portion thereof as a concession is entrenched. However, should any third party, including the seller or the listing broker, pay a portion of the buyer’s representation compensation in the transaction it must be, at most, what the buyer and the buyer’s agent agreed to.
Clearly, negotiation prowess now becomes paramount, alongside a renewed focus on buyer consultation and presentation.
Change breeds opportunity
Preparing for this paradigm shift necessitates a holistic approach. Agents must equip themselves to extend the same level of care to buyers as they do to sellers, fostering consultations and tailored presentations.
This means getting ready to sit down with every buyer for a consultation and presenting them with an outstanding buyer presentation.
Negotiating compensation terms with buyers and listing agents alike becomes a core competency, underpinned by effective communication strategies and robust marketing endeavors. Agents must consider how their buyer’s representation agreement and presentation will align. What the buyer’s agent will do and how they will be compensated must be negotiated and agreed upon with each buyer.
While change may breed uncertainty, it also breeds opportunity. As the industry undergoes this transformation, real estate agents stand poised at the forefront of professionalization. By embracing change and seizing opportunities, agents can navigate this evolving landscape with resilience and ingenuity.
Amidst the flux, a steadfast commitment to partnership and support emerges. Owners and brokers are invited to convene in forthcoming meetings, fostering dialogue and collaboration as we collectively navigate the road ahead. Together, we can ensure the real estate community not only adapts but thrives in the face of change.
Shaun Minnie is neither an attorney nor a broker, but he has tried to summarize the proposal detail and extract the most relevant points. Importantly, he says it’s still too early to assume anything is absolute.
Image credits: Shaun Minnie: supplied and Pexels.
