The NAR Lawsuit in Missouri: Impacts, Opportunities, and Realities in Real Estate
The real estate industry in Missouri is undergoing a seismic shift with a recent lawsuit targeting both the National Association of Realtors (NAR) and several local brokerages. Amongst other things, this legal action, challenging traditional commission structures, has wide-ranging implications for sellers and homebuyers, presenting both challenges and opportunities. This article delves into the lawsuit's impact on buyers, the evolving real estate landscape, and the broader context of earnings in a results-driven society.
Negotiability and Varied Commissions: One key aspect of the NAR lawsuit in Missouri revolves around the claim that the NAR and many brokerages there have enforced a fixed a 6% standard commission rate to home sellers. The lawsuit claims that a traditional 6% commission structure harms buyers by potentially inflating seller prices to cover commissions as well as unfair since the seller is paying the buyer’s broker, the broker cannot act impartially. However, it's important to note that not all states, including Missouri, strictly adhere to this percentage. In fact, many real estate professionals have never charged a 6% commission. Contracts in most states explicitly state that commissions are negotiable, allowing flexibility for both buyers and sellers. Additionally, if sellers do not pay the commissions to the buyer’s agents, the buyers will be forced to pay it themselves which can negatively affect their home affordability which is already an issue in several states like California and New York. Regarding the seller paying the buyer’s commission…that is not entirely accurate. The seller is actually paying the listing broker. The listing broker has the discrepancy to use a portion of that commission to cooperate with other brokers to find a buyer.
Non-NAR Affiliated MLSs and Broker Autonomy: Not all Multiple Listing Services (MLSs) are affiliated with the NAR, and not all brokers or brokerages mandate a 6% commission. Many MLS agreements only require that if a broker utilizes their services to list a property, they must offer compensation to a cooperating broker who brings in a buyer. Importantly, these agreements often do not specify a fixed amount or minimum commission. While technically it could be as low as $1, practical considerations dictate that such a low amount is unlikely to incentivize buyer's agents to show homes. This could increase the likelihood that buyers will contact the listing agents directly, utilizing what is known as Dual Agency, where the listing agent represents both buyer and seller. This is not legal in all 50 states; however, where it is legal, dual agency raises ethical concerns about conflicts of interest and the ability to provide impartial advice to both parties.
Capitalism and Earning Potential: In a capitalist society, people have the right to pursue their financial goals. Real estate pros, like other entrepreneurs, aim to make the most of what they earn. Even though the lawsuit might make us think about what's fair and equitable, it's important to look at the bigger economic picture. Think of it like any sales jobs where the income is tied to performance—just like in real estate. There's no limit to what you can earn, and that's why commissions work. Top of Form
New Opportunities: This lawsuit isn't just stirring the pot; it's shaking things up for how homes get sold. New opportunities will be addressed with technology and by those willing to disrupt the industry. Ever heard of a limited-service listing? This is where the seller accepts some of the tasks and responsibilities with the agent to get their home sold sometimes often paying only to get a home listed on the MLS. The model is similar to discount airlines often with ala carte pricing for additional services. There are other models out there offering deep discounts, and others that disclose how much commission sellers are offering. One company is even helping buyers squeeze a refund from their broker, the one getting the commission.
Conclusion: The NAR lawsuit in Missouri signals a potential shift in the real estate landscape, presenting challenges for sellers and buyers but also fostering opportunities for new business models to emerge. As legal proceedings unfold, the industry may witness adaptations to commission structures and increased scrutiny on the practices of listing and buyer's agents. It remains imperative for real estate professionals to navigate this changing terrain ethically and with a keen understanding of their clients' best interests.
W David Osborne is a licensed broker and Realtor in CA and WA and has held broker licenses in 7 other states as well as 5 real estate auctioneer licenses. He has sold over 7,000 homes and currently runs an independent real estate brokerage in southern California. Contact: W David Osborne (DRE 01346546) 714-910-9820 http://www.ReferralRealEstate.org.