What does a lawsuit against NAR prevailing in Kansas City, Ms mean for California

I wrote a version of this article two weeks ago. Decided it would be foolish to comment on pending litigation but commenting is important right now. A lot of my peers have begun to do so.

After years of following the lawsuit it looks like it is starting to bother the average agent in the field. As the industry predicts how to respond to anticipated changes, I want to start cuing my clients on what to expect and why.?

Most agents ignored the? dramatic changes afoot it seems.? They have to face them since several national brokerages have moved to part ways with the National Association of Real Estate Brokers, and the initial decision in the lower courts has been made against Realtors.

NAR expects an appeal to be granted. This is not over yet..??In the meantime California real estate will not be beholden to any immediate new changes from the Kansas City court, (although it was a federal court & jury) we are already adjusting to avoid the risk of controversy in the future. There is a need to conform to the expectations the public has regarding fair business practices - particularly when it comes to housing.

What follows in this article is a perspective on what the essence of lawsuit is about, according to an independent broker, whom will inevitably be affected by it and is by no means objective. Rather, I support and practice cooperation believing it is in the best interests of homeownership and supporting people becoming homeowners.

“Cooperation”? is when a “REALTOR?” takes a residential listing as a Listing Agent and “cooperates” with every single other “cooperating” REALTOR? by offering to pay them a commission if they bring a buyer and appropriately represent them as the Buyer’s agent. ? The lawsuit says this is unfair and illegal monopolistic activity that deprives the consumers of the opportunity to negotiate the commission rates particularly on the buyer side.

Although there is some little merit to the notion of this assertion I ultimately disagree for several reasons.?

?Commissions are negotiable,? consumers have options across markets to use discount brokers that will rebate a percentage of their commissions to the buyer. Never mind that this fee is something the Seller has already agreed to pay, but remember they did so with some ability to write off the expense, and it creates a more transparent, less risky transaction.? That translates into a higher price for them, and higher prices across a market where some risk has been eliminated. Risk is expensive.

What risk?? Risk that you take on when you engage in a complex undertaking where society has licensed professionals available to help those that can pay.? Some people will inevitably go it on their own rather than hire say a Doctor, Lawyer, Plumber, Accountant, Insurance Agent or a Realtor. Sometimes they do fine and save money but if this were universally, or even mostly true would these professions even exist??

Perhaps one day soon they will not, and that fast approaching reality can play into this lawsuit.??

I understand that part of the lawsuit even complains that this has made housing more expensive: yes I agree with this, and that is why Sellers opt to pay for the Buyer’s agent: but it is to eliminate risk not to scam Buyers.?

I have followed the lawsuit well enough to know that specific instances of marketing buyer agent services as “free” and other dubious practices may end up playing a part in the legal proceedings and influence any new precedents set as a result more than the admittedly one sided logic I am presenting.? This is my position because I have made a career off of benefiting buyers and getting repeat business and referrals as a result of their satisfaction. Cooperation has made that happen more fluidly for more first time home buyers making them home owners.?

??Cooperation makes? representing buyers easier,? and more common. Most first time buyers would try to avoid getting an agent if it wasn’t paid for, many do anyway often without knowing the fee they are looking to avoid is baked in to the cake as it stands the Listing agent keeps it - although sometimes the Seller might get some.

Referrals from my Buyer clients have kept me going in this business. I believe that shows I have saved them money and earned that cooperative commission in their minds and these folks tend to be highly educated and successful. A lot of them are ultimately smarter than me with more money.? My experience and the specific focus of my life’s work makes me useful enough to them to use. So I like the cooperative arrangement but I wont cry a single tear if American courts in all their wisdom decide to eradicate it. Cooperation only goes back something like a decade longer than I do in the real estate industry. I expect a change to the industry because the plaintiffs got some remarkable lawyers. Their claim to fame was suing the tobacco industry in the 90’s.? I have not seen NAR mobilize proportionately to this threat, and, the national brokerages that were named as co defendants are not going to be much help; they are too busy rolling over trying to settle out of the lawsuit and citing it as a reason to sever ties with NAR.

The President of NAR had resigned amid numerous Sexual Harassment Allegations right before the large brokers named started cutting ties and settling with the plaintiffs. It is up to NAR to assert the value to the public of cooperation.?

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The main loser is the public, collectively Sellers will take a hit on price because it is not just riskier to buy without representation, it is harder to go through all of the steps.? Potential Buyers in particular will have a more difficult time in general.

The winner is not the free market, but those who are currently inconvenienced by the competition having access to agency and the information it provides. There are investors sophisticated enough not to need agents, cooperation is an inconvenience to them when they go to buy. They can hope for lower prices in the aftermath of cooperation being eliminated - particularly if there are no listing agents involved in their purchases either. The free market loses when there is less access to the information, traditionally the Buyer’s agent fills the need for the Buyer to use the information fast and effectively so they save both money and time when prices are going up.?

Moving forward I will be contracting more formally with Buyers for them to pay my commission, before I only did this with Buyers that wanted me to provide agency beyond cooperating real estate listings. This has not played out all the way yet, but the most forward looking Brokers are adjusting our methods, as an independent broker it is necessary for me to be among the most forward looking Brokers to be relevant at all.? Terms of the Buyer’s Agreement that I use are very favorable to Buyers - they only pay at close of Escrow, and I will continue to seek to have the Seller pay my commission from the proceeds of the sale in the common event that is in the Buyer’s best interest even after cooperation ends - to the extent allowed by law.

Uche Nchekwube is a full service real estate broker active throughout the Bay Area. Text or call (415)322-0774 or send an email to [email protected] to get help to buy/sell real estate or more information on affordable housing. Information here is not legal advice, for information purposes only, deemed reliable at time of posting subject to errors, omissions and change at any time. DRE Lic no 01750107

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