Behind The Hyperbolic Headlines of NAR's $418M Settlement
NAR's historic $418,000,000 proposed settlement will have ripple effects and repercussions in Maine. Pending court approvals and enactment in late summer, the way agents conduct business and how they get paid will change. That said, in Maine, with its consumer-centric real estate policies and procedures, the changes will be limited in scope and hopefully indiscernible to buyers and sellers. The following includes key settlement takeaways and how they relate to Maine (for MLS / Multiple Listing Service members):
- Mainebiz Article
- Portland Press Herald
- NAR – what consumers and agents need to know.
- MAR – how this relates to Maine.
Key Provisions of the Settlement
Settlement - Agreements must be in writing for MLS participants acting for buyers.
- Interpretation - buyer brokers and buyers need to sign an agreement that outlines their relationship, their joint responsibilities / obligations, and how the buyer broker will be compensated.
- How this relates to Maine - this agreement is already in existence and required.
Settlement - Compensation offers moved off MLS.
- Interpretation - Listing agents cannot enter on MLS the amount of commission a buyer broker will earn when that agent's client purchases a property. This does not mean the listing agent and seller cannot offer a buyer broker commission or that the seller cannot offer to pay a buyer's closing costs.
- How this relates to Maine -
- Listing Agents / Sellers - The current listing agreement, signed by agents / agencies and sellers, will need to be modified. Listing agents will need to discuss compensation strategies for themselves and the eventual buyer brokers with sellers but keep this off of MLS.
- Buyer Brokers / Buyers - These parties will need to spend more time on the existing document (this too might be modified by MAR (Maine Association of Realtors(R)) ensuring that buyers understand that a seller might not offer compensation, out of the closing, for their buyer broker. In this instance, the buyer will be more likely to compensate their agent in another manner.
- Note - the ruling does allow for listing agents to disclose on the MLS listing a seller’s willingness to pay closing costs for buyers. This is welcome news especially if the sellers are unwilling to offer compensation / commission to cooperating buyers agents.
Form over Function
We believe and hope the changes will amount to “form over function”. The current system of highly qualified and fairly compensated seller and buyer brokers working to help their clients has served Maine consumers well for over 100 years. Any significant changes to this current business model that negatively affect consumers would be tragic. Buying and selling real estate is one of life's most important, impactful, and complicated endeavors. Having professional Realtors who are licensed, regulated, and equitably paid will ensure buyers and sellers have the qualified and competent representation they need.
Cause for Concern
One concern is that buyers might be left out in the cold if buyer brokers are not compensated fairly. In the current model, an agent representing a buyer could expect anywhere from 30-50% of the overall commission a seller pays to sell a property. If sellers elect not to offer compensation, buyer brokers will need to turn to their buyer clients (substantially increasing the upfront cost of purchasing a home). Many buyer brokers might elect to leave the industry while others will focus on more wealthy buyers who can afford this surcharge. The combination of fewer buyer brokers and less buyer brokers willing to work with lower-income buyers could leave the most vulnerable buyers (lower-income or less wealthy) exposed. We are already hearing talk of new business models where agencies will offer buyer representation at a cut or flat rate. The potential dumbing down of this vital, complicated, and highly specialized service should give consumer advocates and buyers significant cause for concern. We shall see where this goes over the next several months.
NO Changes Until Mid/Late July if Approved
These proposed changes still must go through court approval. If approved, these new rules would not take effect until late summer (mid / late July by most estimates) and well after what promises to be a VERY active spring and early summer selling and buying season. Given that real estate markets never like uncertainty, we highly recommend buyers and sellers take a cue from this early spring weather and start the process NOW.
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