The issues surrounding real estate commissions have been a subject of governmental scrutiny for some time. Last year, there appeared to be an end to the debate over how buyer's agent commissions are displayed on for-sale listings in Multiple Listing Services (MLSs). The Department of Justice (DOJ) announced a civil antitrust lawsuit and a proposed settlement with the National Association of Realtors (NAR) in November 2020. The DOJ stated that the NAR and its affiliated MLS groups had violated the Sherman Antitrust Act and limited free trade.
Per the terms of the agreement, four key components needed to be addressed:
- The amount of compensation for buyers' agents would need to be displayed to the public in MLS data feeds.
- Buyer's agents would be responsible for explaining to buyers how they are paid and never represent that their services are free to clients.
- MLS listings cannot be filtered by commission amount or agent name.
- Lockbox access must be given to all licensed real estate agents, whether they are part of a particular MLS or not.
In February 2021, Lesley Muchow, deputy general counsel and VP, Legal Affairs and Antitrust Compliance for NAR, filmed a video that referred to the settlement as a positive outcome. She outlined how the four components of the settlement would be addressed, including updates to IDX policies regarding syndication of listings and changes to the NAR's Code of Ethics. Since then, NAR has been mostly quiet about the progress of the settlement.
The deal is off
On July 1, 2021, the Justice Department’s Antitrust Division announced it's withdrawing its consent to the proposed settlement and will voluntarily dismiss its complaint without prejudice. According to the released statement, the DOJ is taking the action to "permit a broader investigation of NAR’s rules and conduct to proceed without restriction."
The statement seems to indicate that future action is coming. According to acting assistant attorney general Richard A. Powers of the Justice Department’s Antitrust Division, the DOJ doesn't want to be "bound by a settlement that prevents our ability to protect competition in a market that profoundly affects Americans’ financial well-being.”
This move sets the stage for another review of the policies around agent commissions and brokerage policies. The DOJ is planning a deeper investigation into the billions of dollars paid in commission each year. The NAR for its part, released a series of tweets responding to the announcement calling it a "complete, unprecedented breach of agreement."
The sudden change in the settlement already has many real estate agents and brokerages scratching their heads. MLS groups may not be clear on what is required on listings. It's unclear at this point whether the NAR will go forward with its proposed changes.
The ongoing discussion over agent commissions is likely to continue to impact public confusion over agent fees. While commissions are dropping, they are still high enough to draw more and more people into a career as a real estate agent.
There are currently over 1.4 million members of the NAR with a vested interest in the existing system. Meanwhile, groups such as the Consumer Federation of America point out that real estate commissions in the U.S. are much higher than in other countries and that the best path forward is to "uncouple" agent commissions so that buyers and sellers each pay for their own agent fees.
For agents and consumers, transparency and disclosure remain keys to a successful transaction. In markets where properties for sale are still in short supply, pocket listings are becoming popular, allowing some agents to bypass the MLS entirely. However, even in those instances, contracts should clearly spell out commission and dual agency if it's legal in your market. This most recent shift is just one move in what will remain a controversial topic.