Buyer’s Agent Commission Lawsuits

By Arianna Marino | January 03, 2025

By Edward Zorn, VP & General Counsel at CRMLS

 

Recently, I was asked by Inman to offer my thoughts on the potential settlement terms that could resolve the commission lawsuits including, the fallout of Sitzer/Burnett and the ongoing onslaught of copycat cases. While the plaintiffs, collectively, are seeking billions in damages, it's not the money that I believe will be the critical aspect of a settled resolution. To resolve a case, both sides must move to the middle to accommodate some of the perspectives of the other side, even those concepts with which they may not agree. The question for the real estate industry in general, and MLS’s specifically, is what rule changes can we make to rectify the criticisms on compensation, while still holding strong to the necessity of cooperation? So, here's what I'm thinking may be an acceptable middle ground, including potential MLS rule changes that should satisfy the plaintiff’s attorneys, consumer advocates and the DOJ. 

 

Mandatory buyer representation agreements prior to showing a property.

If MLS rules mandated Buyer Representation Agreements (BRA) before a showing, and similar language is added to Standard of Practice 3-9 in the NAR Code of Ethics, the buyer would have a more meaningful say in the scope of an agent's representation and of the fees the buyer is expected to pay. Everyone I have ever spoken to agrees with the concept of a BRA, they just do not sign them because of the fear that other agents may win a buyer client, because the buyer does not have to sign anything.

 

Mandating the BRA is an easy fix to this standard objection, and buyer agents can now negotiate a fee consistent with their experience, time, and value. 

 

No unilateral, contractual offers of compensation in the MLS.

 

Some may not agree, but I believe that the MLS's commitment to cooperation is more than sufficient, and, when combined with the technological and other agent benefits that the MLS provides, the MLS could survive without the unilateral, contractual offers of compensation. We can take a cue from how commercial real estate buyer agents get paid. In my own experiences as a commercial broker representing buyers, I never had any issue getting paid. I always had a buyer representation agreement signed that established the exact fee I charged. I then included those costs to be paid by the seller as a term in the offer from the buyer. Direct negotiations between the buyer and seller as to who will pay the buyer agent fee is the exact market-driven compensation process that the consumer advocates, DOJ, and plaintiff attorneys seek.

 

Addition of Concessions in List Price field.

One of the major concerns with the removal of compensation is the potential loss of communication between a seller and a buyer (and their agents) that the list price includes a seller's willingness to pay some type of concessions to assist the buyer. A Concessions in List Price field allows the seller to incentive the buyer directly (rather than the buyer’s agent) if that buyer needs some help in paying transactional fees to purchase the seller’s property. CRMLS has a reporting requirement that, when a property is closed, the listing agent must include any seller concession amounts and details. This field was used in about 40% of closed listings in the past three months, and does not deal with any compensation issues. There are many non-commission types of seller-provided concessions that are a normal part of transactions. If a seller is willing to pay some, or all, of the buyer’s agent fee, that can be treated just as any other incentive a seller may want to provide to entice a buyer to view their listed property, similar to existing concessions like loan points, escrow and title fees, and repair credits. Losing the communication tool for incentives would be especially damaging to first-time buyers and those from disadvantaged groups, as these concessions may be vital to those individuals being able to qualify for a loan and obtain the benefits of homeownership. 

 

Realtors will not receive any compensation above what they agreed to be paid in a written agreement.

Taken together, the three rule changes articulated above will prevent Realtors from keeping any potential extra money as an incentive in the transaction. Therefore, we should formalize this ideal by adding a Standard of Practice to Article 7 in the NAR Code of Ethics that forbids a Realtor from collecting any fees beyond what that Realtor agreed to in a written contract with their own client. This would prevent any potential abuse of the Concession in List Price field. The practical effect of this new Standard of Practice will require the buyer themselves, rather than the buyer’s agent, to decide what to do with any differential between the concessions in list price and agreed-to buyer agent fee. The buyer or seller will benefit directly from any potential differential between the concessions in a list price versus the agreed-to written buyer agent fee in the BRA.

 

Taken together, these possible MLS rule changes would eliminate the alleged monetary harm inflicted on sellers and buyers as asserted by the plaintiffs in all of these cases. Buyers negotiating the fee to be paid to their own agents, directly and before seeing any properties, is exactly what the consumer advocates and the DOJ are demanding of our industry. Sellers must be allowed to communicate any incentives directly to potential buyers, and this can be done in a way that does not negatively impact the free market as each party negotiates their own brokerage fees. Realtors making the commitment that any monies that the different sides of the transaction have made available to get a deal completed which exceed any written agreement on broker fees must always go to the consumers rather than end up in an agent’s hands, is simply the right thing to do. It is critical that the real estate industry seize upon any reasonable opportunity to ensure that cooperation remains the lifeblood of what we do, so we can continue to deliver the greatest gift given by the real estate broker, and their agents, to the real estate consumer: the multiple listing service.