March 22, 2024

The National Association of Realtors (NAR) has been in the news for over a year now dealing with several class action lawsuits. The bulk of the litigation has been centered around Realtor-owned MLS’s in 10 states.

Washington state was not on the list. And our very own private member owned Northwest MLS, was sighted often in the last year in the national news -for being out in front of the bulk of the disputes.

So what did NAR offer to settle on?

There were 3 requests by the DOJ that the Realtor Association agreed to move forward with. 2 of the 3 had already become standard practice in Washington well before this announcement.

1. De-coupling of listing & buyers brokers fees. The listing agreements now break down the listing side commission and the buyer side separately. Previously the listing agreement listed the entire commission as one rate.

This has been in practice with the Northwest MLS for almost 2 years.  In addition, the Northwest MLS already allowed sellers to offer 0% commission to buyers brokers in the listing agreement. This was (and remains) an uncommon practice though.

2. Requiring brokers to enter into a service agreement with buyers before working with them. This has been a state requirement since January of 2024.

This is a big and important change for the industry. A recent study of new homeowners showed that 71% could not explain exactly how their brokers were paid.  The reality is that many brokers don’t like to talk about commission. And some buyers brokers have been describing their service as a buyers broker as “free.”

So the practice of requiring a broker to sit down with a buyer before working with them, explain their service and value proposition, and disclose how they get paid is a good thing. At JLS, we simply refer to this as a buyer consultation, and it is a practice we had in place well before this became law.

3.  Soon, buyer broker commissions will not be displayed on the Northwest MLS. This one will be new for everyone. Yet, sellers will still be able to offer a commission to buyer brokers. All signs point to the buyer broker commission still being displayed on the MLS – most likely through a seller concession. So this may or may not end up making a meaningful impact. It is also a policy request that our industry is struggling with. Prior to this, things had been moving in the opposite direction where the MLS was working to display the buyer broker commission in a more clear way. That included adding the commission to the first page of the contract, and publishing the buyers broker commission to public-facing websites. Now taking the field away completely reduces transparency. Hopefully, the Northwest MLS and Washington Realtors are able to find a solution to this one.

Will this mean Real Estate fees will go down?

Real Estate commissions have always been negotiable and will remain negotiable. And we do not expect this will create any major changes in fees in Washington state. Note above, 2 of the 3 changes are already in place in Washington state and fees have not been changing for most brokers.

How will this affect the industry overall?

Brokerages like JLS will continue to work to elevate our training, expertise, and level of service. At JLS we only hire and work with full-time associates who are passionate about providing the highest level of service.

One thing that is changing is commission negotiation is shifting to the buy side. Part-time and newer brokers (who work almost entirely with buyers) will need to negotiate for themselves. The days of skipping a consultation and just showing and writing up a home are over. We fully expect a retreat by many semi-retired and part-time brokers in the coming years, and Realtor numbers to fall.  This is because buyers will demand more from their broker, and not everyone who gets a Real Estate license is offering the same level service & expertise. But the strong will survive and thrive.

Will buyers save money from this settlement?

Without a doubt, this settlement will create more conversations between buyers and brokers. This puts much more of the pressure on the buyers’ broker to be able to articulate their value. These conversations in some cases will lead to lower fees. Either because the value is not there, or the broker can not communicate their value well…or both. But many veteran top producing brokers will stick with the rates were charging.

The positive here is we believe buyers will get smarter about interviewing who they hire, and overall, this should lead to better buyer representation.

And buyer agency has evolved and will continue to evolve. As we noted earlier,  52% of the time now buyers find the home online themselves. But the home search is only a small part of the value a buyer broker. Buyer agency is primarily important for the guidance, advocacy, and expertise that a broker provides. You don’t know what you don’t know. This is not a transaction that most do frequently. This is not the same as travel agencies. The legal and financial implications are huge. It therefore will continue to make all of the sense in the world to hire an expert to represent you.

Will sellers save money from this settlement?

We don’t believe home sellers will NET more money on a home sale because of these changes. The market value of a home is intrinsic to the market environment we have today.

Your home is worth what the market will pay. But that depends on how the market is functioning. And home values today are tied to the competitive environment that they are all listed and sold under.

In the Pacific Northwest, and definitely with our brokerage; it is common practice for the listing broker to help the seller prepare (stage/prep), professionally present the home, and promote the home to create an incredibly competitive market. We all know in many cases, this creates multiple offers on homes in low inventory environments like we are in.

Take a look below at how a home sells in our current market.

52% of homes are sold via the buyer finding the home on their own, via the internet and social media.

19% through signage and open houses.

And 29% of homes are still sold from the broker introducing the home to the buyer. The 29% includes:

-Broker to broker networking.

-Brokered filtered MLS search sent to buyer.

-Off-market pocket listings & other sources from buyer broker.

So, if you (as a seller) are trying to get top market value for your home, why would you cut your listing activity down by 29%? Offering a market rate commission to buyers’ agents activates these brokers and gives a seller 30% more demand.

And what about a sellers market? That is when it is even more crucial. The home might sell itself, but if you activate all of the brokers, you will typically get more offers.

The point is our current work promotes the most competitive environment possible to get top dollar.

And the statistics support hiring a full service broker and paying a buyers broker when listing your home.

We reviewed the last 12 months of home sales in Whatcom County that offered a 2% into the MLS, verse those that offered a 3%.

The homes offering 3% buyer broker fee: 99% list price to sales price ratio. 14 days (median) on market.

The homes offering 2% buyer broker fee: 97% list price to sales ratio. 21 days (median) on market.

At JLS we do not have a fixed rate for list side and buyers broker fees. We have brokers offering a range of different rates for different levels of marketing and services. We do however track our performance. And we are currently averaging 100% list to sales price ratio and a median of 12 days on market.

So their is a range of what your home can sell for. And who a seller hires does make a difference on not only price, but how long it will take to sell.

And if you go it alone (For Sale By Owner) the stats are even more glaring.  91% of sellers who to tried to sell themselves eventually list with a broker. And the homes that do sell For Sale By Owner, on average sell for 13 % less.

What’s the future hold for Realtors?

More changes are on the horizon. At JLS we will continue to offer transaction excellence with highly trained full-time brokers. You can learn about our brokers on our Bellingham Real Estate Podcast, and by reaching out for a free consultation.