With the National Association of Realtors, Compass, Keller Williams, RE/MAX, and the parent corporations of Coldwell Banker, Sotheby’s, and Intero (among others) all agreeing to settle the massive class action lawsuits against them, one might expect significant changes in how real estate transactions are conducted. However, many local real estate agents seem to be clinging to the ways of old.

Background of the Lawsuits

The plaintiffs in the various lawsuits maintained consistent and straightforward arguments: Agents have conspired to keep artificially high commissions by pressuring sellers to pay exorbitant fees to the agent representing the buyer, in addition to what they already pay their own listing agent. These compensation offers were generally non-negotiable once included in the listing agreement. This made it difficult, if not impossible, for sellers to negotiate lower commissions, even if the buyer found the home independently and the buyer’s agent’s involvement was minimal.

As part of the unprecedented $900 million-plus settlement reached by the real estate industry, agents will no longer be permitted to offer any compensation to agents representing buyers in the Multiple Listing Service (“MLS”).

The Industry’s Response

Thus far, many local Realtors^® express confidence in their ability to maintain the status quo, despite the new restrictions that prohibit the inclusion of any commission to the buyer’s agent in the MLS.

The prevailing idea is for agents to “suggest” that sellers continue offering high commissions to the buyer’s agent in the listing agreement, but not publish these amounts on the MLS. Instead, buyer’s agents would be directed to access the details on the offered commission amount from a specified website. Each agent or brokerage would create their own method to disseminate the commission information to other agents—there would be no centralized website that savvy buyers could check to see the commission for all properties on the market.

If implemented, the lack of transparency will lead to a structure significantly worse for clients than the pre-settlement situation. Currently, buyers can see the commission offered to the buyer’s agent on public-facing websites, such as Zillow, Trulia, and Redfin. However, this information comes directly from the MLS.

Since buyers can currently view the offered commission on each property, they can be vigilant against unethical agents who might steer them towards a specific listing due to its higher commission. Likewise, a prospective buyer would consider an agent’s criticism of a property with caution if they were aware that the seller was offering a lower commission.

Agents will inevitably pursue information about the offered commission diligently, while buyers are less likely to know where to find this information.

DeLeon Realty’s Competitive Edge: Setting the Standard

DeLeon Realty stands out as the only major local brokerage that consistently offers a commission-free way for buyers interested in purchasing our listings. Namely, when buyers directly approach us, neither the buyer nor the seller incurs any buyer’s-side commission. While the seller still pays the listing side of the commission, we waive the entire amount that would typically be paid to the buyer’s agent.

Equally importantly, we have gained significant recognition for implementing this client-favorable policy. As a result, many buyers choose to approach us directly if they prefer not to pay an agent to help with their purchase.

This structure dramatically minimizes the risk of buyers passing on a property due to a buyer’s agent’s desire for more commission.

Potential Opportunities Arising from Unethical Buyer’s Agents 

With the extensive media coverage surrounding the recent court cases and massive settlements, many sellers have become informed that they are not obligated to pay high commissions to buyer’s agents. Consequently, many sellers are asking their listing agents to offer much smaller amounts, or even zero, commissions to buyer’s agents. However, certain agents are pressuring (or advising) sellers to still offer 2.5 percent or more to buyer’s agents. This situation will lead to varied commission offers from one listing to the next.

Unless other brokerages begin to follow DeLeon Realty’s lead and offer a commission-free option for buyers to purchase their listings, without paying any buyer’s-side commission, it is highly likely that buyer’s agents will be tempted to steer their clients towards listings with higher inducements to the agent.

Ironically, this situation presents an opportunity for savvy and well-informed clients. Specifically, they should carefully consider listings that offer lower commission, although identifying these properties might be more challenging once the buyer’s agent commission is no longer listed in the MLS. However, with the right buyer’s agent, a buyer can negotiate an arrangement to target these types of opportunities.

By Michael Repka