A settlement agreement in a major class-action lawsuit against the National Association of Realtors goes into effect on Saturday— and it’s already impacting realtors across the Bay Area.
“This is a sea change for both the consumer and for real estate professionals,” Tricia Thomas, CEO of Bay East Association of Realtors, said.
Due to the $418 million settlement, agents can no longer list their commission rate on multiple real estate listing service websites like Zillow or Redfin.
While there wasn’t a rule specifying the commission rate, the industry practice was to set it at around 5-6% of the home’s sale price.
“This is happening as the market is moving along and we’re anticipating a pretty busy fall,” said David Stark, a spokesperson for Bay East Realtors Association.
The way that buyers and sellers interact with realtors is about to undergo a radical shift. Realtors in the Bay Area are already being impacted by a settlement agreement that will take effect on Saturday in a significant class-action lawsuit against the National Association of Realtors.
According to Tricia Thomas, CEO of the Bay East Association of Realtors, “this is a sea change for both the consumer and for real estate professionals.”. “Everyone is stepping into uncharted territory. “.
The trade association was sued on grounds that it had inflated agent commissions in home sales through deceptive practices regarding the division of commission between selling and buying agents.
Now, commission rates will need to be discussed individually between a home seller and buyer and their respective agents. As a result of the $418 million settlement, agents are no longer able to list their commission rate on multiple listing services, such as Redfin or Zillow.
According to Thomas, realtors will also need to justify their commission rates and be more open about the services they offer their clients.
“It’s possible to have two identical-looking houses, but one seller made significant interior improvements while the other didn’t,” the speaker stated. That will affect the length of time the house is listed for and the services the realtor offers; it might entail more or different types of marketing. “.
An agent’s commission fee may have previously been mentioned if you were selling a house on Zillow, Redfin, or another website that lists multiple listing services. It was industry practice to set the commission rate at approximately 5–6% of the home’s sale price, even though there was no regulation dictating the commission rate.
Next, the buyer’s and seller’s agents would haggle over how to divide that commission between them. Although real estate agents have consistently maintained that the commission rate is flexible, a lot of buyers and sellers would proceed with a transaction based only on the price that is displayed on the listing website.
Buying agents began directing their clients toward properties with higher commission rates as a result of this practice. Studies have indicated that this particular system may have impeded competition in certain sales and even led to some home sellers offering a higher commission, irrespective of the realtor’s level of involvement in the sale of the property.
Realtors will also be required by these new regulations to inform their clients about the intricate process of buying and selling a home, according to Steven Huang, president of the San Francisco Association of Realtors.
“People aren’t always taught everything from A to Z up front,” he expressed. “As real estate brokers, all we have to do is fully inform the client of our worth and our level of education, and then let them determine what a reasonable price is for that assistance.”. “.
The litigation is merely one sign of impending changes in the real estate sector. A “Buyer-Broker Representation Agreements” state bill is presently pending in the Senate. If approved, it would mandate that before a buyer’s agent tours a property with a client, the agent must sign a contract outlining the services and rates of compensation.
Michelle Perry, the Santa Clara County Association of Realtors president, stated, “This contract will actually have you sit down and go over why you’re being compensated, how you plan to be compensated, and what kind of value you are bringing to the table for your client.”. “We’re going to demonstrate our worth even more now. “.
Realtors are getting ready to see how these new regulations work out as the Federal Reserve is predicted to cut interest rates next month and as the number of homes being actively listed in the Bay Area rises.
Speaking on behalf of the Bay East Realtors Association, David Stark stated, “This is happening as the market is moving along and we’re anticipating a pretty busy fall.”. “Tell us how it’s going after three and then six months when you can. “.
