Listen, I’m no attorney, but what I can tell you is that this antitrust lawsuit recently brought against the National Association of REALTORS® (NAR) makes zero sense when you break it down to common sense.
The filing of the lawsuit basically says that NAR violated federal antitrust laws by conspiring to require home sellers to pay buyer’s commissions at inflated rates.
That’s not at all accurate.
Let’s start with the “conspiring” part of that statement. There is no conspiracy. All the agents around the country didn’t get together and say, “Hey, let’s all charge the same amount of money for our services.” NAR didn’t put in the rules and regulations that an agent has to charge a specific amount or percentage to sell a home. The market bears what the market bears. Right now, the average commission is 6 percent because that’s what the market bears. Back when I first started selling real estate, it was 7 – 8 percent, because that was what the market would bear at that time.
Have certain disruptors and changes in our industry caused agents to be more flexible with their commissions? Sure, but there’s no more conspiracy in that than there is in the price of pizza. (I love a good analogy!)
Here’s what I mean. I live in Long Island. In my immediate area, there are five great pizzerias from which I can order a pie and pay somewhere around $12 – $14. Now, did those five shop owners get together and “price-fix” pizza purchases? Of course not. Those prices are just what the market here will bear. It’s the same with real estate.
If you really want to look at conspiracy stuff, turn the table on this legal lens and look at attorney practices. According to the American Bar Association website, attorneys traditionally get paid one of two ways: They can charge an hourly rate or a contingency fee—which is essentially a commission—based on an amount won in a lawsuit. Here’s what their site says: “In a contingent fee arrangement, the lawyer agrees to accept a fixed percentage, often one-third of the recovery.” Essentially, they’re saying that attorneys who base fees on contingency charge 33 percent. So, if they want to look at the National Association of REALTORS® and whether or not they’re price-fixing fees, we should be looking at the American Bar Association and how attorneys are collectively charging 33 percent. I’m not saying they’re conspiring; I’m just stating what it says on their site.
Next, let’s look at the “require home sellers” portion of their allegation. There’s no requirement. We don’t have the monopoly on real estate. Just because agents charge a fee for the work they do doesn’t make it a requirement. Home sellers have choices. They can go to a flat-fee broker, a discount broker, an online service (where they’ll get less by way of marketing and representation), or they can sell themselves.
Do REALTORS® get a large percentage of the business in this industry? Yes. But no one is forcing homeowners to use an agent. Think of it like the Coca-Cola brand. Coke has a large part of their marketshare, but they’re not the only soda game in town. People have options such as Pepsi, in addition to a wide spectrum of other sodas. Consumers aren’t required to buy Coke any more than they’re required to use a REALTOR®. An agent charges what they charge for the myriad services they provide. A seller can choose to use an agent or any of the other options available to get their home sold. No requirement necessary.
Finally, let’s take on the “to pay buyer’s commissions at inflated rates” part of legal-speak. That’s not what happens at all. What really happens is a homeowner interviews agents and then decides to hire one and pay them a fee for their work based on their skills and services. Once a homeowner agrees to hire that agent and pay a commission, that agent then gets to decide how much of that commission they’re willing to give to a buyer’s agent. While some may decide to pay out half, some might pay less if the home doesn’t need a lot of work to sell, and more if it does. The point is that what the listing agent decides to pay out is based on what’s best for the homeowner to get the place sold in the timeframe they need or want.
You have to ask the question: “Why is this lawsuit happening?” There are several reasons. Most importantly, as an industry, we’re starting to falter in establishing and communicating our value and justifying the fees we charge. It’s one reason there are so many new disruptors in the marketplace. That’s why in all the webinars and workshops I’ve done this year, I’m teaching a lot of techniques to help agents communicate just how valuable they are.
Darryl Davis has spoken to, trained and coached more than 100,000 real estate professionals around the globe. He is a best-selling author for McGraw-Hill Publishing, and his book, “How to Become a Power Agent in Real Estate,” tops Amazon’s charts for most sold book to real estate agents. He is the founder of the Next Level® real estate training system The Power Program®, which has proven to help agents double their production over their previous year. Davis earned the Certified Speaking Professional (CSP) designation, held by less than 2 percent of all speakers worldwide. To learn more, visit www.ThePowerProgram.com.
