Brokers Worried, Not Panicking Over Possibility of ‘Decoupled’ Commissions


Way back in January, RISMedia asked leading brokers around the country what they saw as the biggest threat to the industry this year. Not a single one mentioned the lawsuits or investigations alleging rampant conspiracy and price-fixing in real estate.

This month, nearly every broker and executive surveyed by RISMedia’s Broker Confidence Index (BCI) said they were talking about the latest developments in the commission lawsuits with their agents, with a defeat in the Burnett case last week marking a potential turning point.

Ron Howard, vice president of sales at John R. Wood Christie’s International Real Estate in Florida, said at this point he is telling his team to prepare for potential near-term change.

“Depending on outcomes and consumer sentiment, be prepared to communicate your value very clearly to both buyers and sellers,” Howard said. The big picture saw confidence among brokers rise overall, from 5.8 to 6.1, despite the unfavorable verdict, high mortgage rates and continued inventory issues.


The verdict was the big news from last month, though, with some of the biggest names in the industry traveling to Kansas City, Missouri to testify. It took four and a half years for the lawsuit to reach a conclusion, with two brokerages settling the case in September and two more going to trial shortly after. 

Filed by recent homesellers who alleged that the National Association of REALTORS® (NAR) and big corporate brokerages conspired to inflate commissions, the almost $1.8 billion judgment against the defendants appears to have gotten the attention of people both in and outside of the industry, and sparked a flurry of mainstream media coverage.

One possible, but not immediate outcome of the lawsuits is the aforementioned “decoupling,” where buyer clients pay their agents directly. The outcome of the Burnett trial is unlikely to propagate this kind of change on its own—although a Department of Justice investigation and multiple additional lawsuits could.

But brokers are not panicking about this possibility (yet). When asked by RISMedia to rate the impact of a “decoupling” of commissions on their businesses, brokers mostly said it would be significant, but not insurmountable.

Rating on a scale of 1-10, with 10 being the largest impact, the average for respondents was 6.7. Most said right now they are focusing on improving skills and making sure buyer-side agents are prepared and working on skills.

“(Agents must) improve their skills in presenting both their value proposition as a buyer’s agent, and describing how agents are paid, said Rod Messick, CEO of Berkshire Hathaway HomeServices Homesale Realty based in Pennsylvania. “I.e., what value does the consumer get for the fee they are paying and how will it be paid?”

“We are telling them to get buyer representation agreements,” said Scott Myers, broker/owner of CENTURY 21 Scott Myers REALTORS® in Texas. “We have always advocated that, but are emphasizing it more.”

Valerie Belardo, broker/owner of RE/MAX at Home based in New Jersey, said she has been encouraging all agents to take the ABR class and held meetings to discuss the trial and its outcome. Patrick Shea, president and CEO of Windermere-owned Lyon Real Estate in California, also said agent education was a renewed focus.

“(Agents) are in constant training to educate sellers and implement buyer representation agreements,” he claimed.

The big picture

Lawsuits aside, the business of real estate continues to face other day-to-day and month-to-month challenges. An increase in the overall BCI right on the cusp of the winter slow season would appear to be a good sign that other aspects of the housing landscape are improving.

Messick said that it is still decidedly a mixed bag.

“Interest rates, geopolitical unrest and likelihood of an economic recession are compounding weak market conditions and making it difficult to be more enthusiastic, even though demographic metrics like employment and population in our services are generally positive,” he said.

Other brokers were cautious but positive, with most still citing interest rates. Scott MacDonald, broker/owner and president of RE/MAX Gateway, said that rates are “continuing to scare” buyers.

Myers claimed that some of these issues with interest rates were offset by a “robust” market for new homes—something that more and more national data supports.

Notably, new homes are becoming cheaper, helping offset affordability issues that have escalated in the current high-rate environment. Builders have also been willing to offer incentives to attract buyers, as the market still remains broadly unaffordable to many.

Source link

About The Author

Scroll to Top