A landmark federal case this year upended decades-long practices in how real estate brokers are paid.
In the spring, the National Association of Realtors and several of America’s largest residential brokerages agreed to settle the Sitzer/Burnett antitrust lawsuit brought by home sellers in Missouri.
The settlement is significant in that it changed compensation rules in most home sales across the U.S. What’s perhaps even more significant to front-line real estate professionals’ long term is that broker compensation — traditionally something of an afterthought in sales — becomes yet another area where the homebuyer and seller will likely take a keen interest.
Your clients are likely to question what they’re paying for more frequently.
But a strong case can be made that traditional real estate agents and brokers are needed on both sides of the deal.
But how?
The answer: Solve problems, answer questions using information and analysis they can’t find, do for your clients what they can’t do on their own.
Some analysts believe a significant number of agents and brokers won’t rise to the challenge, particularly part-time brokers and buyer-side agents who relied on commissions once openly advertised on NAR-controlled Multiple Listing Services.
Earlier this year, the investment bank Keefe Bruyette & Woods has estimated that up to 30% of total U.S. commissions revenue could disappear.
The brokers and agents left to compete for that smaller pie will be the ones who can demonstrate their competence and value to clients.
What has changed?
NAR agreed to settle the case in the spring after it was found by a jury to have colluded with brokerages to inflate fees; the ruling immediately prompted copy-cat lawsuits. NAR, without admitting any wrongdoing, and several other large brokerages opted to settle to shield themselves from future liability.
By settling, NAR and the brokerages agreed to two major concessions that went into effect in late August 2024.
NAR-affiliated multiple listings services will no longer allow seller brokers to post fee offers made to the buyer agents.
Also, the buyer agents will need to sign a written contract with their clients prior to touring a home listed on NAR-affiliated MLS.
Many analysts believe that the settlement will break a norm where brokers are paid a fee of around 5%-6% of the closing price, split evenly between the seller and broker agent.
The settlement, NAR critics like the Consumer Federation of America say, will compel buyer and seller agents to negotiate a fee with their clients. Longer term, it may lead to new models where a homebuyer pays a flat fee to their broker for defined services. It’s thought that with negotiation broker fees will become less uniform and may decline nationwide.
Why does this matter?
In the post Sitzer/Burnett world, there will almost certainly be fewer passengers on deals.
A buyer’s agent can no longer comb through the MLS and see how much they can expect to be paid by the home seller after a deal closes. The buyer’s agent will have to negotiate with the seller’s broker off the MLS or, alternatively, negotiate a fee with the buyer, in addition to signing a written agreement with their client before touring homes.
Arguably, these changes were inevitable.
Homebuyers and sellers are more sophisticated today than previous generations, and there are alternatives to the traditional broker-model way of buying and selling homes open to them. Even without this legal push, the typical U.S. homebuyer and seller would have over time likely become much more likely to question the cost of the services.
So how do you make a case for your value?
It starts with having access to real estate data that is more precise and accurate than anything that a consumer can find online. You’ll need to provide information and insights they can’t Google themselves.
One of the most important jobs of a seller’s broker, for example, will be the ability to price a home to sell and realize the most return for their seller. Likewise, the job of buyer agent is to ensure their client is paying a fair price for the home compared to all the options available to the buyer.
In this regard and all the duties that brokers and agents are required to perform, ATTOM can help with a range of services that provide:
- Transaction transparency: With ATTOM’s recorder and assessor data, agents and brokers can get better insight into property sales histories, including detailed information about buyers, sellers, prices and mortgages.
- Pricing and market analytics: ATTOM’s automated valuation models (AVMs) provide hyper-local pricing information. This could help real estate professionals stay compliant with any guidelines or caps on fees by offering clear, defensible property value estimates and market trends.
- Fair market analysis: ATTOM’s boundary and neighborhood data makes it possible to do hyperlocal analysis, helping to ensure that agents price properties consistently across markets.
- Client and agent data enrichment: By leveraging ATTOM’s match and append services, real estate professionals can ensure that client and agent data are accurate and updated. This can support the tracking of agent commissions.
- AVM and comparable sales: This provides real estate agents and brokers with reliable comparable sales data could assist in consistent pricing.
ATTOM’s robust property data can give you a leg up in the post-settlement world of real estate deals. Check in over the coming weeks as we break down how each of these areas can enrich your business and help clients with what is usually the most important financial transaction of their lives.
Written by: Jennifer Von Pohlmann