Much has been written about last week’s verdict in federal court in Missouri, which went against the National Association of Realtors and a few major real estate companies. The case was about the alleged inflation of real estate commissions and allegations that the real estate industry had conspired to keep commissions artificially high, thus harming sellers and some buyers.
Some accounts paint the verdict as an earth-shaking event that will upend the real estate industry and bring scheming companies, monopolistic multiple listing services and greedy realtors to heel. Depending on where your business is based and, more importantly, how you run your business, this could be true. However, if you run a high value-add, transparent, good-faith business here in western Washington, chances are not much will change. Here’s why.
Our local multiple listing service, the Northwest MLS, and the state of Washington have been out in front of these issues for several years. One of the issues called out in the Missouri lawsuit was the requirement that sellers offer a commission to the buyer’s broker as a condition of listing their home on the MLS. We’ve had no such requirement here since 2019 and the commission being offered to a buyer’s broker is stated right out front in all public-facing listings as well as on the front page of the Purchase and Sale Agreement.
When we stopped requiring sellers to offer commissions to buyer brokers some thought that this change would cause the unraveling of the entire real estate commission structure. Not so. Sellers offering to pay a commission to the broker who represents the buyer in their transaction is still the best, most efficient business model available. The fee is factored into the listing price up front and offering it helps attract the broadest possible buyer pool to the listing, which in turn helps the property achieve the highest possible selling price.
To keep us out in front of possible future legal questions, beginning January 1, 2024 Washington state law will require all brokers in the state to have a written agreement in place with the buyers they represent. The agreement will detail the nature of the buyer-agent relationship as well as how the agent will be compensated. For many of us this new requirement will also prove to be much ado about nothing. We have always had written listing agreements in place for sellers and while usually not in writing, most buyers I have worked with are familiar with my “agreement”. Specifically, I agree to go to work for you, to shake the trees to find your dream home, to negotiate the best possible deal for you and to protect your interests in the transaction all the way through to closing. In return I ask that you agree to work exclusively with me and not with multiple agents, which simply wastes everyone’s time. I also agree to be compensated per the listing on the MLS. If it’s 3% that’s fine. If it’s less and I take a bit of a hit that’s fine too. I take on that risk, all relevant listings get shown to my clients, regardless of the commission, and everyone understands the game. If we do start seeing listings offering low or no buyer agent compensation as a result of all the new rules we’ll have to have another conversation, but I don’t see that as likely.
I completely support all the new laws and regulations designed to bring clarity and transparency to the real estate business. Having run an open and transparent business based largely on client referrals for the past 15 years, aside from a little new paperwork I don’t see the need to change anything about how I run my business. My clients have never been shy about negotiating commissions and I’m always happy to have that conversation and to articulate my value. That certainly won’t change.
Let me know if you have questions – or a different take – on the latest news from the real estate front. I’m happy to have that conversation too!
Rip.
