Above, Lisa Sturtevant and Brian Schneider
After its new report, Dispelling Myths About Real Estate Commissions and the MLS, was released April 12, Bright MLS Chief Economist Lisa Sturtevant and legal counsel Brian Schneider spoke in-depth at a virtual presentation about how the National Association of REALTORS®’ (NAR) proposed settlement and other current issues have not, would not and should not negatively impact the industry. They emphasized that buyer agents will continue to be vital assets for homebuyers.
The report examined more than one million home-sale transactions throughout the Mid-Atlantic between 2020 and 2023 to also provide insight into whether there is evidence to support claims that agents steer buyers toward homes with higher agent commissions, and whether commissions have driven up home prices.
“While the online real estate portals have made looking for a home easier, and maybe more fun, we heard consistently that consumers often feel overwhelmed by how much information there is, and that having an ability to work with somebody in person is really important,” said Sturtevant. “And that a real estate agent with knowledge and expertise is really what’s critical to the home-buying process. We found that there’s a range of other services and skills and expertise that real estate agents bring that participants we talked to found incredibly valuable.”
Schneider gave an overview of the NAR settlement, explaining that it seeks to end lawsuits and requires MLSs to adopt new rules. He argued that the impact of the rules on brokers and clients is overstated, and that the changes will enhance transparency and consumer understanding.
“And we never see any sort of negative relationship that suggests there’s this type of steering going on, or a correlation between compensation and days on market or home prices,” he said, adding that the settlement agreement process is expected to take about a year, with the new rules being implemented in the third quarter of this year, potentially subject to change.
Sturtevant pointed out that Bright MLS felt that the headlines are misleading, and in some cases wrong about NAR’s draft settlement in the class-action litigation against NAR and the industry’s brokers, associations and MLSs. And it’s even more troubling because the potential negative impacts to fair housing are being lost in the noise.
The report noted that rather than creating a fairer and more open housing marketplace, altering how buyers and sellers pay for a real estate advisor could risk making it harder for moderate-income families, first-generation homebuyers and other prospective first-time buyers, including veterans, to achieve homeownership. Bright MLS offered its take on myths and facts pertinent to the topics.
Myth: Agents steer clients to homes with higher commission rates.
Fact: Our analysis of over 1 million home sales from 2020 through 2023 shows no relationship between sales activity and commissions. If agents were steering buyers to homes with higher buyer-agent commissions, then we would expect to see homes with lower commissions take longer to sell and homes with higher commissions to sell more quickly. Instead, our analysis shows effectively no relationship between the offer to pay a buyer’s broker and the days a home took to sell. Most buyers now find their home online, and use their real estate advisor to help them finalize their decisions and then negotiate the purchase. It would be very difficult for buyer’s agents to keep their buyers from touring a home. It simply is impractical for a buyer’s agent in today’s market to engage in the type of systematic steering being suggested.
Myth: REALTOR® commissions are driving up home prices.
Fact: Home prices are driven by a variety of factors, and our analysis confirms that commission rates are not one of them. Using a multivariate regression approach that controls for a range of factors impacting home prices between 2020 and 2023, we confirmed that it is the property characteristics (e.g., number of bedrooms, age of the home and others) and mortgage rates that are the most significant determinants of a home’s price. The offer to pay a buyer’s broker has a weak relationship with home prices, and the direction of the relationship is opposite of what has been reported in the media. Offers to pay the buyer’s broker tend to reflect lower percentages as the list price of similar homes increases, not the other way around.
In the current housing market, home prices are rising as a result of historically low inventory. Existing homeowners are reluctant to sell as they hold onto sub-3% mortgage rates. New construction activity is working off a decades-long deficit. Lower real estate commissions are not going to lower home prices for buyers. Only an increase in supply will have a meaningful impact on home prices.
Myth: The MLS is a closed network of self-interested agents and brokers who profit unfairly off homebuyers and sellers. Consumers can now simply look online to buy or sell their property.
Fact: Public real estate websites and apps, where buyers and sellers browse for homes (and see advertisements), rely on the nation’s local MLSs to get their data. The MLSs set rules to support the accuracy and breadth of the information about homes for sale, then feed the information to hundreds of thousands of websites and apps to make sure that consistent, accurate information is widely available to consumers.
The report included information that Bright MLS gleaned from its research as well. It included:
- Listing a home on the MLS supports an open and fair housing marketplace. When brokerages hold listings off the MLS to sell as “private” or “office exclusive” pocket listing properties, they are keeping information about available homes for sale from a lot of prospective buyers.
- There is substantial evidence that private marketing—holding a property’s information off the MLS and marketing it in secret—results in poorer sales performance for the seller and reinforces residential segregation patterns that create an unfair housing marketplace.
- We want to be sure the pro-consumer market remains. The terms of NAR’s proposed settlement seem intended to bring additional transparency to real estate payments. But there are potential negative outcomes if MLSs and brokers do not take care to keep consumer protection and fair housing in mind. Buyers who cannot afford to pay out of pocket for a real estate professional to guide them through the process stand to be the largest unintended victims. Without the transparent and impartial offers that have been the norm, we could see greater opportunities for discrimination.
- Unless real care is taken by the industry, we have the potential to have an inequitable system of real estate where homes exchange hands based on who you know and what you look like. Let’s keep focus on making sure we have an open, equitable and fair housing market that supports all Americans’ opportunity to enjoy the benefits of homeownership.
