Is a shake-up on how real estate agents are paid on the horizon? In November 2023, a federal jury in Missouri ruled that the National Association of Realtors, a powerful real estate organization that owns the trademark to the title Realtor and controls much of its members’ activities, and several other large brokerages conspired to inflate agent fees. This ruling will force buyers to negotiate a fee with their agent and it will make it easier for lower-priced agents to catch the attention of buyers and lead to greater price competition. But some argue that this case could leave most Seattle-area homebuyers to fend for themselves in an ultracompetitive and pricey market and that homebuyers to shell out more money upfront to buy a home. If co-op fees are prohibited, homebuyers might have to pay their agents out of pocket. This will further erode purchasing power for our veterans, minority buyers, and first-time homebuyers who are struggling for loan qualification to begin with.
In March 2024, the National Association of Realtors (NAR) reached to a Settlement Agreement to resolve a series of lawsuits against the organization. The key issue in the lawsuits was the practice of "tying," whereby NAR members require the commissions paid to buyers' agents to be set by the seller's agent. When a home is listed under tying agreements, the compensation for a buyer's agent is established before the buyer can be sure of the quantity or quality of their services their agent will provide. Tying also means that sellers may have to offer higher commission to maximize the chance they sell their home through the practice of "steering." If the agreement is approved, tied compensation will no longer occur on MLSs. Furthermore, buyers and their agents will have to explicitly agree about what services agents will provide, online MLS databases will no longer display commission rates, and NAR will also be required to permit real estate agents to be paid for their work without subscribing to MLS.
Here in Washington state and the Northwest Multiple Listing Service (NWMLS) which serves most of Washington have already made several changes to make the system more consumer-friendly. In 2020, NWMLS, which is not affiliated with the National Association of Realtors or subject to its rules started publishing agent commissions on its webpage. The seller is also not required to offer the buyer’s agent a fee – which is a key issue in the federal class action lawsuit. On January 1, 2024, important revisions to the law that governs real estate brokerage relationships (RCW 18.86) in Washington State – otherwise known as the “Agency Law” – become effective. These are the first significant revisions since the Agency Law took effect in 1997. The revisions, which are explained in detail in this bulletin and set forth in Senate Bill 5191, include the following:
NWMLS revisions to the state’s Agency Law will require agents to have a written agreement between buyers and sellers that spell out the scope of the agent’s services and compensation.
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