Federal Lawsuit Impacts Real Estate Practice Changes Nationwide

If you've been following national real estate news, you are already familiar with the antitrust lawsuits filed against the National Association of Realtors over the past year, allegations that NAR has denied but nonetheless also addressed through standard practice changes that will go into effect this month, nationwide. The national media has delivered a frenzy of misinformation as the truth is, NAR does not, nor has it ever, set commissions, and commissions were negotiable long before this settlement. However, it brought to light issues that some consumers had with their interpretation of price fixing, and NAR was right to step up and consider changes to the national MLS system of practice to address those consumer concerns.

As with everything in life, change can be daunting and these new standards will impact the entire industry, from realtors to brokerages, right down to Buyers and Sellers. From the Dream Team's perspective we believe that this transition will reflect only positive outcomes, as we believe that transparency is never a bad thing, and that the result will be a more solid footing for Buyers and Sellers, and the industry as a whole.

The settlement agreement, in addition to other things, mandates two key changes to the way members and MLS participants do business:

1. NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could continue to be an option consumers could pursue off-MLS through negotiation and consultation with real estate professionals.

2. NAR also agreed to create a new rule requiring MLS participants working with buyers to enter into written agreements with their buyers before the buyer tours a home. This mandate is non-negotiable and will be required for all Realtors, and is an important consideration for Buyers who engage with a licensed realtor with whom they request to show property. Past standard practice has been that a Buyer/Broker Agreement is entered into prior to submitting an offer to a Seller when working with an agent. The new rule requires a Buyer/Broker Agreement form be signed before an agent or broker shows a Property with full transparency for all sides.

There are a total of nine practice changes to the MLS that will impact Buyers and Sellers but the net/net is that since Buyer agent commissions can no longer be indicated in an MLS listing, the discussion of broker commissions with Buyers will now be a practice that all realtors will have at the beginning of a property search with prospective clients.

Here are some of the reasons the Dream Team is looking forward to these changes and why we believe they will reinforce professional standards:

·    Increased Transparency: Buyers will have greater transparency into the costs associated with purchasing a home, including buyer agent commissions. This information will help buyers better understand the financial aspects of the transaction and make more informed decisions. With these changes, Sellers now have the opportunity to understand upfront the value of offering, or not offering, to pay a Buyer's Agent commission, and the implications both have to their home-selling process.

·    Improved Consumer Education: Anyone who has "gone it alone" when buying or selling a home can testify that the process often can be extremely daunting. It's one thing to list a for sale by owner, or head out solo for a weekend of visiting local open houses, it's quite another to land in the minefield of tough offer negotiations, navigate head-spinning multiple-offer strategies, understand and gather local comps to understand market value, and head down the prickly road of contracts, inspections, due diligence remediation, and being best prepared for the closing table. Realtors who are committed to the entire process are true experts in these factors and so many more, and we welcome the opportunity to show Buyers and Sellers our worth in helping Clients understand the value we truly and unequivocally bring to the table.

·    Stronger Industry: It's possible that with these changes will come a "weeding out" of real estate licensees who do not commit to the level of professional standard consumers should expect, and which is the Dream Team's professional signature. "Hobby" realtors who don't keep up with the latest in professional practices may decide to leave the industry, reducing the pool of realtors who don't best serve a consumer's needs through advanced training, continuing education and professional standards as set forth in the NAR Code of Ethics.