Home Topics Real Estate NAR claps back during commission attacks

NAR claps back during commission attacks

The National Association of Realtors has spoken out against critics of the structure of the Real Estate Commission who are tightening its rules.

NAR, which has more than 1.4 million members, is currently defending against multiple antitrust lawsuits from home sellers and a homebuyer supported by leading law firms seeking to get homebuyers to pay their brokers directly rather than listing brokers paying buyers-brokers from Paying for what the seller sells pays the listing broker – a move that could turn the US real estate industry on its head by effectively forcing changes in the way buyer agents are traditionally compensated.

On November 19, the US Department of Justice (DOJ) filed an antitrust lawsuit against NAR alleging that the trading group’s rules were illegal restrictions on broker competition. The DOJ and NAR simultaneously filed a settlement proposal requiring the NAR to repeal or amend several rules that the DOJ deemed anti-competitive, including a requirement that the amount of compensation offered to buyers’ brokers for each MLS listing be made public must be made accessible.

Discount Real Estate Brokerage REX Real Estate, which previously conflicted with NAR in print and provided the DOJ with agent control records before suing the trading group, commissioned a study that was released earlier this month and Prosecutor Mark Nadel writes that property commissions will increase by up to $ 50 billion a year due to a lack of price competition.

Nadel said the lack of competition was due to stockbrokers imposing co-op fees on buyer-brokers, which is the result of the NAR rule for multiple listing services, which the above commission lawsuits are about, which provides stockbrokers with a blanket, unilateral creation Must make offer of buyer-broker compensation that is either a percentage of the gross selling price of the home or a specific dollar number when entering a home in a broker-affiliated MLS.

Also earlier this month, REX filed a lawsuit against NAR and Zillow, alleging antitrust violations over NAR rules requiring Zillow to separate non-MLS listings from MLS listings on its website, including listings from REX that avoid MLSs.

Jack Ryan | Image credit: REX

Jack Ryan, CEO of REX, told Axios in February that NAR’s commission system is suppressing US home ownership rates and reducing overall household wealth. “This is a great story between David and Goliath, both in terms of odds and moral implications,” he said. He later told Axios that REX’s fight against NAR and its rules would be “an ongoing brawl for the next five or six years.”

In a comment, NAR President Charlie Oppler accused those who question the way commissions are currently set up under the guise of consumer protection.

“Those who try to attack the commission structure of real estate agents hide their real intentions with misleading claims of consumption,” wrote Oppler. “These class action lawyers and those wrongfully trying to position themselves in the real estate market are looking for a payoff when they can confuse enough people with misinformation and obvious omissions. The reality is that the commission structure provides everyday Americans and small businesses with vital benefits that they would not otherwise get. “

Charlie Oppler

Oppler did not name any specific companies or lawsuits in the statement. Inman asked NAR who “those who illegally attempt to position themselves in the real estate market are referring to” and what is illegal about them, but NAR declined to comment.

The current commission structure allows more people to realize the American dream of owning a home, as paying a buyer’s broker right at the deal would freeze already financially troubled buyers. “[U]In contrast to the purchase price, the payment to the broker could not be included in the mortgage and financed, ”explains Oppler.

In contrast, Nadel’s study claimed that the buyer’s brokerage fee could be written off as part of the mortgage.

“[A]As long as the fee a buyer pays to a buyer’s broker is legitimate, mortgage lenders should be willing to consider the fee as part of the purchase price of the home for mortgage purposes as it is now, ”he wrote.

“Mortgage lenders shouldn’t care about whether a buyer’s broker is paid directly by the buyer or indirectly by the listed broker, and this should be reflected in a definition of ‘selling price’ – to set the maximum amount on a mortgage – which includes the amounts that Paid to both Buyer and Seller Brokers as specified on the Standard Closeout Form. “

For example, for-sale-by-owner (FSBO) sellers and non-traditional listing brokers like REX allow buyers to include the buyer-broker commission in the sale price, according to the Nadel.

“To the extent that a traditional listing agent wants to impede non-traditional buying agents, they may refuse to include the buying agent’s fee in the sale price, but a mortgage broker should still be willing to do so,” he said.

“Any lack of availability of this option today is likely due to a lack of demand. If it were illegal for the listing of brokers or sellers to pay the buyer’s agent, one would expect lenders to formally define the sale price as including the buyer’s brokerage fee, even if that is offset by the fee paid to the seller is separated. “

Mantill Williams

When asked whether or not these claims are true, NAR spokesman Mantill Williams told Inman, “Lenders do not normally provide for mortgage commissions to be funded.”

NAR’s comment also argued that critics ignore buyer agents providing critical service to homebuyers.

“Agents level the playing field for homebuyers, especially those who are first-time and less well-funded consumers, which antagonists conveniently fail to mention,” wrote Oppler.

“Consumers who don’t value these services don’t have to pay for them,” he added. “The market already offers alternatives to the traditional broker model. Consumers who choose a broker who offers more comprehensive services receive real added value in return, especially when compared to consumers in overseas markets.

“The US consumer’s MLS experience far surpasses other countries that, with rare exceptions, do not have MLS, and consumers are forced to rely on a few large brokers, creating a more fragmented and less competitive market creates. “

Oppler also highlights the role MLS play in increasing competition between brokers, giving consumers more options as to which service, broker and commission model they prefer.

“The cooperative broker MLS system allows smaller brokers to compete with larger ones,” he wrote. “Within seconds of signing up for an MLS, you have instant access and access to the largest centralized database of residential real estate offers in your market.

“By listing all properties in one place, even the smallest brokers have access to the same offers, information and pools of buyer brokers as the largest brokers.”

Oppler also claimed that the MLS database and system are designed to “encourage collaboration between brokers who share all of their information in one place, and provide buyers with the best and greatest number of options possible, as efficiently and transparently as possible . In return, sellers also get access to the largest possible pool of buyers within a market, as their listing broker works with all of the buyers’ brokers to get the best deal. “

Inman asked NAR if this means the trading group believes that the MLS system would no longer exist if buyers paid their brokers directly, and if using the MLS is in the best interests of buyers and sellers if it is is not the fiduciary duty of the listing and buyer broker to use and contribute to it, regardless of who pays it.

“Without the shared incentive of the existing MLS, brokers would be incentivized to increase their market share by only providing listings to buyers who work with their agents and by fragmenting rather than consolidating property information,” Williams Inman said via email .

“Courts have repeatedly ruled that the MLS system increases the efficiency of the marketplace and thus serves the best interests of sellers and buyers alike.”

He added, “Some brokers are trying to take advantage of the MLS system without contributing.”

Email Andrea V. Brambila.

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