Game-Changing Settlement Leads to Reforms in Real Estate Practices

Game-Changing Settlement Leads to Reforms in Real Estate Practices

A landmark agreement might upend the housing market.

The National Association of Realtors settled charges alleging that individuals were coerced to pay exaggerated commissions by agreeing to pay $418 million on March 15.

All of this went to trial because consumer groups said that in order to receive a higher payoff, agents had misled consumers into properties with higher price tags or larger compensation offers.

NAR consented to remove a rule requiring a property seller to disclose the amount of commission they will pay the buyer’s agent as part of the settlement conditions.

What does this entail for customers in the area, then?

Kevin Wilson, President of Greater Nashville Realtors, stated, “There will no longer be a unilateral offer of compensation to a buyer broker on the MLS.”

Wilson has sixteen years of real estate experience in Tennessee. He has served as a buyer’s and seller’s agent.

“Commissions have always been negotiable and will remain negotiable between brokers and clients,” Wilson stated.

Before an agent works with a buyer, they must previously sign a buyer representation agreement in Tennessee. Among other things, the contract talks about buyer agent commissions.

The buyer may now include agent pay in the bargain, even if the large settlement may save sellers money on commissions. Longer talks will therefore probably occur throughout the entire game.

“Buyers come into the office and sit down with me in much of the same way a seller would in a listing presentation. We do a thorough a buyer consultation where we explain the value we bring to the transaction, set expectations for the buyer, and, in that agreement, there is on page one a part where we talk about compensation and how much the buyer’s agent will be paid and by whom,” Wilson stated.

Some real estate agents might quit as a result of this. It’s too soon to estimate the number.

“In 2020 — when we had the pandemic — I thought this would be catastrophic to our membership. It ended up being the opposite. When we saw interest rates hit 8% I thought perhaps we’ll see a 10% decrease in membership. We’re actually seeing an increase, so I hesitate to say what this might do to our membership going forward,” Wilson stated.