The two core remedies in the Sitzer-Burnett v. National Association of REALTORS? class action settlement are not going to meaningfully reduce fees for buyers and sellers (h/t to the NAR lawyers).
The settlement's two core remedies are hugely ineffective:
First, you can't defeat a pricing cartel by simply asking for lower prices; they have market power. The core remedy of the settlement is to require borrowers be reminded of their already existing legal right to negotiate.
Consumer negotiations will be ineffective not least because the game theory for agents to keep fees high is so well established. My personal view is that the core function of the NAR as well as the aggregation of real estate agents into national brokerages is to facilitate and enforce this pricing coordination.
Second, the settlement required removal of the commission amounts from the MLS itself. All this will do is create inefficiency as agents are expected to *call* each other for manual commission discovery. This just creates a further drag on productivity with no benefit.
Here's a rational way to think about agent commissions:
Seller Fees:
The truth is that most homes would sell without a real estate agent when priced at 80% - 90% of the appraised value. This is why banks cap lending at this amount because they have high confidence a house priced at this level would sell very quickly.
It follows then that commissions on this 'baseline' amount of 80% - 90% of the appraised value should be 0%. With current pricing, the 6% agent sell side fee captures a huge portion of any gains above the 'baseline' price for the majority of houses that do sell near appraised value (ie at 100%).
Buyer Fees:
The correct class action settlement would simply have been to ban the practice of sellers paying for the buying agent. Each agent should be paid directly and transparently by their own customer.
In this world, buying fees would immediately drop since buyers would suddenly be faced with having to pay 3% to agents for listings the buyer themselves found on Zillow. When the 3% buyer's fee is made that stark, no one would pay it.
Many agents will say that the seller paying the buyer fees helps homebuyers since it allows buyers to use all of their available cash solely on the downpayment, mortgage, and closing costs. The simple legislative fix would be to allow buyers to roll agent commissions into the loan amount. This fixes the problem directly and disarms the NAR backwards rationalizing of their anti-competitive commission structure.
Fee Mechanisms
The buyer/seller should have to pay agents directly and not via net mechanisms at the closing table. Sending a $50,000 wire to an agent (equivalent to a @Tesla Model Y!) feels very different than $50,000 coming off the top.
Agents know this, of course ...
Mary Ann Azevedo
https://lnkd.in/e8YWJbz7
