There’s a new lawsuit that was recently filed which takes aim at the National Association of Realtors (NAR) rule that requires all brokers to offer buyer broker compensation when listing a property on the Multiple Listing Service (MLS). The lawsuit claims this has driven up costs to the seller and stifled competition. You can read more about that here.
Things to consider
- There’s currently a lot of competition in the real estate market, with traditional brokerages and online brokerages. OfferPad and OpenDoor have recently come to the market, and their model is completely different. Actually, I’ve seen OpenDoor’s overall fees come out to be roughly 11% of the price when selling, give or take, and they offer below market value. There’s a market for a seller who needs to get out, doesn’t want to deal with showings, and can afford to take quite a bit less than market value. But OpenDoor turns around and will sell, like a traditional seller, offering compensation too.
- Cooperating with other Realtors is important, and the MLS allows for that cooperation. Do you know anyone who works for free? Buying or selling a home is not like doing self-checkout at Target. Do you want to represent yourself in the largest transaction of your life, one that has more zeros than your day-to-day transactions? My guess is no. I often like to compare our industry with going online to webMD and all of a sudden because you’re armed with information, you’re now an expert in the pain you have in your leg (it’s obviously deadly). You might as well get your scalpel and start fishing around to see if you can find it. I’m not saying Realtors are Doctors, but we do require licenses and continuing education, and experience matters—in real estate transactions and with your Doctor or Surgeon.
- Risk – in traditional real estate brokerages, Realtors don’t get paid until a property sells. In order to help a property sell, we call upon the other members of our local Realtor board to bring buyers. Let’s face it, a buyer could come from anywhere, a listing agent might procure them or another Realtor with another company, in another office 45 minutes away might bring the buyer. The MLS allows for that cooperation to happen. If you want to look at a system without an MLS and without competitors who can work together, take a look at the NYC real estate market and their lack of a consumer facing MLS. If you read this 👉article, you can see the mess it’s created and I’d argue this approach is not consumer friendly AT ALL.
- Transparency – The MLS and cooperation allows for transparency among Realtors and the consumer. It shows consumers what’s available in their local market. Saying a Realtor won’t show a property that’s low in compensation is hedged when a buyer sees a home online and wants to see it.
What are your thoughts on this potential market change? I’d love to hear them. Comment or email me at email@example.com with your take.