You may have recently heard some big news shaking up the real estate industry! The National Association of Realtors (NAR) recently agreed to a $418M settlement in a lawsuit that has caught the eye of many. You may be wondering what this lawsuit is about and how it will reshape real estate landscape. While each state may have different levels of impact, the lawsuit touches on current practices that may have broad implications for how business is conducted in the future. You might ask how this will affect you as a consumer. Well, don’t fret, we are wondering the same thing…how will this affect us as real estate professionals? What changes can we anticipate for our business and how can we continue to serve our clients at the highest level? There are a lot of opinions, and many of them are simply not true. It will take a while for this to shake down and be understood. We believe it will take some time for everything to settle in, so until that happens, Herman & Davis Properties, under Charter One Realty, will conduct business as usual. Our company carries more listings and number one in our market, we will make sure that our sellers and buyers have excellent representation and that all are compensated fairly for their services.

Opinions are rampant in the industry and many predictions do not hold water because they are not founded on truth. Here are a few:

1. The new settlement will prohibit sellers from paying a commission to a buyer’s agent. FALSE.

Paying a fee is the seller’s decision and nothing changes in terms of their options. They want a successful sale of the property with the most favorable terms. Giving an incentive for buyer agents to show and sell their home is the best way to achieve that.

2. The settlement will not relieve sellers of any financial burden on the buyer agent fees. FALSE.

Sellers may choose not to pay buyer agent compensation, but they cannot avoid the net economics. Buyers will be asking for seller concessions in other ways, such as closing costs or the purchase price. Taking this stance may hurt Sellers more than they think, as they limit prospects and sales to buyers who want as much of their costs wrapped into the price as possible so they do not have to come up with more cash at closing to pay their agent.

3. The settlement will force real estate brokers to reduce their compensation. FALSE.

The settlement does not establish any limitation on what Realtors charge and what services they provide. Realtors do not collaborate on fees. This practice is forbidden. Realtor fees have always been negotiable.

4. The settlement will, for the first time, allow sellers not to pay compensation to an agent for procuring a buyer. FALSE.

There has never been seller obligation to pay compensation to an agent for bringing in a buyer. However, this practice has historically worked very well. This new settlement prohibits compensation from the seller to be listed/posted on Realtor MLS systems.

5. The settlement will lower real estate prices. FALSE.

Real estate values have always reflected supply and demand, not the fees charged by agents.

6. The settlement ultimately reduces the total cost of the transaction services, since sellers will no longer pay buyer agent compensation. FALSE.

Buyers may require sellers to pay their agent’s fee as one of the terms of their contract. Services are not free and this will get sorted out. Just because two parties share in the cost, does not mean the total cost has been lowered.

7. The settlement is a fantastic win for buyers who can now negotiate their fees. THIS REMAINS TO BE SEEN.

Buyers can negotiate their fee but may pay for it in sometimes less than favorable ways. Most loan programs, especially VA loans, prohibit the borrower from paying a commission. This hurts veterans who want representation when buying a home. It also hurts buyers who are limited in the cash they have available for a down payment. They were previously able to finance it into the loan but now having another cash obligation could prevent them from buying altogether.


Restitution. The settlement will give some sort of restitution to consumers who have been harmed in recent years by Realtors. Those who have worked the numbers say it works out to about $10 per person. The class action attorneys are the true winners, having submitted an $80 Million legal bill.

Changing Business Practices. There are two key changes to the way members and MLS participants do business. NAR agreed to create a new MLS rule prohibiting offers of compensation on the MLS. This would mean that offers of compensation could not be communicated via an MLS, but they could be an option consumers could pursue.

Stay tuned. This is supposed to take effect in July. We will keep you posted. No matter how these changes affect real estate transactions, there is one thing that will never change. All of us at the Herman and Davis team will always put you, our clients, first and do what is in your best interest.