Navigating through the real estate market can sometimes feel overwhelming and difficult, especially in today’s world where property costs and interest rates are constantly on the rise.
Real estate veteran Katrina Campins is of the opinion that the recent legal developments with the National Association of Realtors (NAR) don’t change much in the grand scheme of things.
Homeownership Poised To Become More Difficult
Owning a home looks set to become even more problematic in an already difficult market because of these recent happenings.
“The repercussions of this lawsuit are numerous and significant,” she said in a recent interview. In a major turn of events for the world of real estate, the NAR has announced that they have reached a proposed $418 million settlement agreement in a class-action antitrust lawsuit.
Lawsuit Sheds Light On NAR Laws And Practices
The lawsuit, which was filed by a group of home sellers, accused the NAR and major brokerages of collaborating to artificially inflate commission rates. It also sheds light on some long-standing practices within the U.S. real estate market which have a few question marks on them.
If it is endorsed, one of the changes that will come as a result of the settlement would be that brokers listing homes on the NAR’s Multiple Listing Services (MLS) won’t be mandated to show the compensation rates that they pay buyer’s agents.
Changes Could Lead To Decentralized Negotiations
Also, MLS will no longer display information about broker payments. This change means negotiations will now be decentralized and payment can now happen directly between home sellers, brokers, and agents, outside of the MLS platform.
The proposed agreement is likely to change how real estate deals are done. It should result in more competitive commission rates and give buyers and sellers more freedom and control over transaction expenses.
Changes Could Benefit Buyers And Sellers
For buyers, this might mean dealing with a more complex landscape where agent services and expenses vary and are up for negotiation. Sellers could gain from having more flexibility in negotiating commission setups, possibly lowering the expenses of selling a house.
Campins worries about the settlement. She has advised caution to those who see the changes as a win against supposed exploitation by agents.
Campins Says Things Might Become Difficult For Buyers
In particular, Campins sees the situation becoming more difficult for the buyer. She mentioned that these changes are a result of “individuals actually seeking increased representation in home buying.”
“So, now what’s going to happen is, basically, buyers are going to go directly to the listing agent, right? And think about all the misrepresentation that’s going to occur at that point in time and then think about all of the kickbacks that are going to be given, all the bonuses,” she said.
Good For The housing market?
Campins also cautioned about listing agents possibly making buyers compete against each other to raise property prices for the sellers’ advantage. She doesn’t support that idea. She said: “I think this is extremely unfortunate and while people think that it’s going to be good for the housing market, I completely disagree.”
As part of the proposed settlement, the NAR also made an agreement that requires agents negotiating with buyers to sign a written agreement with them. This way, they’re fully informed right from the start of the process.
Buyers Might Hesitate To Sign
Campins mentioned that while she doesn’t oppose the concept of a buyer’s agent using a representation form, she expects that many buyers would hesitate to sign such a document because they are unwilling to pay their agent directly.
“Homeownership, in my opinion, just got hit again because of this lawsuit,” she remarked.
NAR Says That Agreement Settles All Claims Against Them
According to information from NAR’s website, The agreement will settle claims against NAR, involving over one million NAR members, as well as all state/territorial and local REALTOR® associations, association-owned MLSs, and brokerages with a NAR member as the main person, which had a residential transaction volume of $2 billion or less in 2022.
The settlement, which still needs court approval, states that NAR denies any wrongdoing regarding the Multiple Listing Service (MLS) cooperative compensation model rule (MLS Model Rule).
Words From Nykia Wright, NAR’s Interim CEO
This rule was introduced in the 1990s in response to demands from consumer protection advocates for buyer representation.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers. It has always been our goal to preserve consumer choice and protect our members to the greatest extent possible. This settlement achieves both of those goals,” said Nykia Wright, Suntimes CEO.
Other Outcomes From The Agreement
Other important outcomes of this agreement are that most NAR members and many industry stakeholders won’t be held responsible for these issues anymore, and consumers will still have the option of choosing cooperative compensation when buying or selling a home.
NAR also made sure that almost all brokerage entities with a residential transaction volume over $2 billion in 2022 and MLSs not owned entirely by REALTOR® associations can easily get releases if they want.
Members Included In Release, Exclusions, And Employee Coverage
NAR worked hard to include all its members in the release, covering over one million of them. However, agents linked with HomeServices of America and its related companies, the last corporate defendant still fighting the Sitzer-Burnett case, aren’t released under this settlement.
Additionally, employees of other corporate defendants named in the cases aren’t covered either. These changes will start in mid-July 2024.
Agreement Was The Best We Could Get, CEO says
Ms. Wright said that if they kept fighting in court, it would have harmed members and their small businesses. She added that although there couldn’t be a perfect solution, the agreement reached was the best they could get.
It gives a way forward for the industry, which makes up almost one-fifth of the American economy, and NAR.
Still Focused On Our Mission
Ms. Wright also pointed out that for more than a century, NAR has protected and promoted the right to real property ownership in the country, and they are still focused on that mission.
Kevin Sears, NAR President, said that NAR is there to serve its members and American consumers. He acknowledged that although the settlement is expensive, they think the benefits it will bring to the industry are worth it.
