After a $418 million dollar settlement by the National Association of Realtors (NAR) was announced in March, many Leelanau Realtors are thinking about what the future holds.
This settlement would resolve litigation brought on behalf of home sellers related to broker commission, according to NAR.
Kim Creamer, a five star real estate leader, has been licensed since 1981 and she has both good and bad thoughts about the settlement.
“The lawsuit wants to uncouple the buyer-and-seller,” Creamer said. “I think both of those are excellent and in favor right from the onset with the buyer further defining the buyer-broker contract and typically staying in a geographic area.”
Creamer says that this has been a common practice already.
Creamer continued saying this will present challenges specifically for buyers who have limited funds to pay the down payment and closing cost.
The settlement achieves two goals, according to NAR: 1. Resolves claims against NAR and nearly every member; all state, territorial and local Realtor associations; all association-owned Multi Listing Service (MLS); and all brokerages with an NAR member as principal whose residential transaction volume in 2022 was $2 billion or below.
2. The settlement preserves cooperative compensation as an option for consumers looking to buy or sell a home — as long as such offers of compensation occur off of the MLS.
MLS is a database established by cooperating real estate brokers to provide data about properties for sale.
This is what NAR CEO Nykia Wright said in recent statement: “Ultimately, continuing to litigate would have hurt members and their smallbusinesses,” Wrightsaidina statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry, which makes up nearly one-fifth of the American economy, and NAR.” The settlement will require the association to pay $418 million over four years.
“One of the disappointing parts of the settlement is that the judge wasn’t seeing the value of Realtors,” Creamer said. “For me, I’m going to recommend to my clients that they continue to offer a buyer-broker compensation ... By having no offering you are going to reduce buyers looking at a property.”
For example, If a real estate agent gets a 5% commission, typically 2.5% goes to the listing agent and the other 2.5% goes to the buyers agent. Sometimes it works in various other split percentages.
Without a settlement it could have forced the association to file for Chapter 11 bankruptcy protection, leaving members, associations, MLSs and brokerages exposed.
The standard 5-6% commission fee on a housing transaction will be eliminated through the settlement, even though this percentage has been negotiable in the past.
The focus of this settlement is on ensuring that both buyers and sellers are fully aware of how their respective Realtors are compensated in a transaction, particularly emphasizing the importance of buyer representation, according to NAR.
As for housing pricing dropping, let alone on luxury property in Leelanau County, you better think again.
Homes prices are based upon the ones around it and with Leelanau’s low inventory do not expect any relief in cost.
“Our entire market is really challenging and I feel the most empathy for first-time home buyers,” Creamer said.
Rob Serbin of Serbin Realty does scratch his head a bit about why the NAR and big brokerages reached a settlement after being accused of fixing commission rates. They have nothing to do with commission rates in the first place.
While the settlement has been made public this month there are still months or more to travel through the courts before end results are available,” Serbin said. “The NAR has nothing to do with commission rates.”
Aspire North Realty, a guiding body for real estate in northern Michigan could not be reached for comment regarding the settlement and the effects this will have on the Leelanau County housing market.
“We don’t have a clear picture of how we should move forward,” Serbin said. “Inventory levels are incredibly low and that will continue to push prices up ... this commission squabble isn’t going to make a difference in terms of value,” Serbin said.
Jon Oltersdorf, of Oltersdorf realty had this to say about this situation: “It might not mean much, sellers can still elect to pay buyers compensation just have to negotiate outside MLS ... It may allow more transparency to negotiate their own compensation,” Oltersdorf said. “The industry will find creative ways to deal with this and people are represented as always.”
