Phoenix and Scottsdale Realtors help separate fact from fiction
By Terrance Thornton | Digital Free Press
The announcement of a settlement reached in March 2024 by the National Association of Realtors to resolve antitrust claims against the trade-industry behemoth for unfair practices when assessing broker commission fees sent initial shock waves through the real estate community.
National Association of Realtors officials say the settlement, which is subject to court approval later this summer, makes clear the trade industry association denies any wrongdoing in connection with the Multiple Listing Service compensation model rule.
Of note: The rule asked sellers of residential real estate who wished to list homes on the Multiple Listing Service, where the majority of homes are listed for sale, to offer compensation to the buyer’s agent.
Under the terms of the agreement, NAR would pay $418 million over approximately four years, according to a press release.
“NAR has worked hard for years to resolve this litigation in a manner that benefits our members and American consumers,” said Nykia Wright, interim CEO of NAR in a prepared statement. “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.”
What’s at stake? Local Realtors here in the Valley of the Sun tell the Digital Free Press it is the assumed 6% commission standard for listing fees held by brokers and sold by agents.
“The proposed settlement includes a ruling requiring buyers to sign an employment agreement with their broker, just as sellers do now, which stipulates their commission,” said Sheryl Bowden, Phoenix Realtors board of directors president. “It also states that the commissions for buyer agents would not be listed in the MLS. Buyer and seller agents would need to proactively communicate with each other and their clients to determine what commission is practical.”
Ms. Bowden points out commission rates have always been negotiable.
“It’s important to note that the National Association of Realtors has never set commission rates,” she said. “They have always been negotiable.”
Ms. Bowden explains despite what headlines may claim nothing has been formally decided until the court of law finalizes settlement stipulations later this summer.
“The rule changes are set to take effect in July, with the global settlement finalized by the end of 2024,” she explained. “Until then, it’s business as usual as the finer points are worked out in the court system. Once in effect, associations like Phoenix Realtors will play an even greater role in professional development, providing Realtors with the training, resources and tools they need to be successful.”
Ms. Bowden explains a point of confusion is how will the pending ruling impact government-backed mortgage programs.
“There is currently uncertainty when it comes to government-backed mortgage programs that don’t allow agent commissions to be financed. In this scenario, seller and buyer agents would need to agree on a buyer’s commission as part of a concession,” she said. “Until the settlement is finalized, it’s premature to discuss what impact this will have on the greater market.”
Word on the street: More questions than answers
Scottsdale Realtor Michael Wills at HomeSmart says recent headlines regarding the National Association of Realtors settlement announcement were disappointing.
“I was very disappointed with the settlement,” he said. “That said, anyone that tells you they know exactly how this will impact the industry is speaking a bit prematurely right now, in my opinion. There are more questions than answers. The biggest part of this settlement, and the part making all the headlines, is that brokers can no longer advertise compensation for a buyer’s broker in the MLS.”
Mr. Wills points out sellers can still offer compensation to a buyer’s broker.
“They just can’t advertise it in the MLS,” he said. “How will seller’s communicate any compensation being offered to a buyer’s agent? Will compensation to a buyer’s brokers become just one more thing that is negotiated in the contract similar to commercial real estate?”
Mr. Wills says the notion of the ruling creating a global shift in how brick-and-mortar is bought and sold are a bit premature.
“Will this cause change in the industry? I’m sure it will to a degree, but until we know how this shakes out, we don’t know,” he said.
“Brokers, lenders and title companies are all sifting through this to see exactly how to negotiate these changes. Buyers overwhelmingly want representation when making what is usually the biggest purchase they will ever make. I am confident that a solution will be found that allows buyers to get the representation that they want while providing fair compensation to the agent.”
Meanwhile, the Federal Reserve has signaled a succession of interest rate decreases, which may or may not impact day-to-day sales throughout the Valley, Mr. Wills suggests.
“The Fed lowering rates certainly gets everyone excited. However, mortgage rates don’t always immediately follow what the Fed does. If demand for mortgages stays low, lenders may not drop their rates and continue to earn a bigger spread,” he said. “Scottsdale has remained a relatively strong market. If we look at the February data, we saw a 5% median sales price gain year over year. Our days on market is starting to trend down and volume is ticking up ever so slightly.”
Editor’s Note: The above story has been updated to better explain the Multiple Listing Services Compensation Rule pointing out the rule was negotiable and not required.
