While the 6% agent commission structure has always been negotiable, critics say NAR didn’t advertise it as such.
flat fee from the buyer, an hourly rate or a pre-determined percentage of the sales price. Industry watchdogs predict more buyers will be incentivized to forgo agents altogether or hire “no frills” brokers who offer basic services at a lower price, a model that has grown in use in the UK and other parts of Europe. At the very least, competition for clients will push some agents to charge reduced commission percentages. A report in the Wall Street Journal predicted commissions could be slashed by as much as a third. Headlines published since the settlement announcement have predicted everything from cheaper housing prices and more homes listed to an exodus of agents from the industry due to the loss of income. Allison Norman, a Sonoma County-based agent with Keller Williams Realty, hopes industry members and the media will “take a step back” and wait for any major change to “work itself out” over the next few months. “There is so much misinformation out there right now—among agents, consumers and news outlets,” says Norman. One point NAR itself alleges has been misrepresented is the suggestion that NAR sets commissions. “They are negotiable,” the association stressed in a March 19 press release. The requirement is “only that listing brokers communicate an offer of compensation,” NAR officials wrote in the release. “That offer can be any amount, including zero.” According to NAR’s Handbook on Multiple Listing Policy, seller agents must “specify on each listing filed with the service the compensation being offered by the listing broker to the other MLS participants.” That said, the industry standard has been 6% for decades and few listing agents stray from it out of concern over “steering,” or the possibility that buying agents will steer their
clients away from considering homes that result in less agent compensation for the same work. The origins of the 6% standard are murky, but stem from earlier in the 20th century when the National Association of Real Estate Exchanges—later to become NAR—stipulated in its code of ethics that seller agents should split commissions equally with buyer agents, according to a CNN.com story from December 2023. NAR later dropped the requirement, but the practice stuck. Up until 1950, commission rates were set by local boards of realtors, which did little to discourage commission rates from climbing. When they were around 6%, courts ruled it illegal for realty boards to establish set rates— but by then the 6% number had settled in as an industry standard and, with little incentive for agents to
negotiate lower, the rate, while no longer required, remained. Adding further to home buyers’ and sellers’ reliance on NAR and its industry practices over the years has been the power of the MLS. Multiple Listing Services have been around for more than a century, allowing
Sonoma County real-estate agent Allison Norman is confident the industry will adapt.
April 2024
NorthBaybiz 39
Made with FlippingBook - Online magazine maker