The National Association of Realtors is on a losing streak. They need some wins.
The largest trade association in America with 1.5 million members, the Realtors’ group began its downward spiral in August 2023. That’s when The New York Times published allegations of sexual harassment by the association president.
It was a classic “Me Too” scandal. President Kenny Parcell allegedly engaged in years of inappropriate behavior toward multiple women with no accountability. He denied the complaints but resigned soon after the story broke.
Other problems lurked with the potential for even greater impact.
Those troubles burst into public view on Halloween 2023 when a federal jury in Kansas City ordered the association to pay nearly $1.8 billion in damages for artificially inflating commissions paid to agents.
Laura Kusisto, national legal affairs reporter at The Wall Street Journal, covered the story. In a podcast, she said, “The essence of this case is that the current system for commissions, one in which the seller’s agent pays the buyer’s agent’s commission, is an antitrust violation. It amounts to a collusion, a conspiracy between real estate agents around the country to keep fees high and to hurt consumers.”
A few months later, Bob Goldberg, who served as the association’s CEO, resigned. This January, the Realtors announced Tracy Kasper, who was president for just a few months, received a threat to disclose a past personal matter unless she “compromised her position.” She reported the threat to law enforcement and stepped down.
In March, the Realtors announced settlements in a slew of lawsuits about commissions. The association agreed to pay $418 million in damages.
The American University Business Law Review says, “The $418 million settlement upends long-standing industry practices that allowed sellers to set buyers’ agent fees, taking the bargaining power away from these buyers and keeping commissions in the United States higher in comparison to most of the developed world. This settlement has the potential of driving down commission rates and shrinking the number of real-estate agents.”
John Pope, a Folsom Realtor for more than 40 years, tells me the organization’s legal troubles are “all we’ve been talking about on a daily basis for months and months in our industry.”
New rules took effect Aug. 17. Realtors who represent buyers now must sign a contract with their client, something California was already doing, Pope says.
For nearly 30 years, sellers typically paid agents on both sides of the transaction and decided how much each agent would receive, usually 5% or 6% of the sale price. The agents then split the fee. When a home went on sale, the listing showed the percentage the buyer’s agent could expect.
Under new rules, multi-listings no longer disclose whether the seller has offered to pay the buyer’s agent or how much. Buyers sign agreements explaining how much their agents receive before they tour homes with an agent.
Buyers now negotiate directly with their agents, rather than letting the seller set both cuts. This doesn’t guarantee commissions will decrease. That’s up to buyers and their agents.
“It’s too early to say how this will change things for consumers and brokers,” Pope tells me. “For a lot of them, it won’t change things that much. But there will be a group of consumers who say, ‘Maybe this is an opportunity to negotiate for what I want in a broker and how much I am willing to pay them.’”
If commissions get smaller, buyers may benefit by paying lower home prices. Or sellers may benefit by keeping more profit. It depends on local market dynamics.
Recent news reports say higher interest rates, a surplus of brokers and new rules caused thousands of Realtors to quit.
“For a while, I didn’t want to pick up a newspaper because the coverage was so bad,” Pope says. “Time will tell what exactly this will mean. But I think in the very near future we will have gotten used to this new way of doing things.”
Another reminder that one constant in business and life is change.
Gary Delsohn can be reached at gdelsohn@gmail.com. Follow us on Facebook and Instagram: @insidesacramento.
