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Published in RISMedia
An ongoing federal class action lawsuit challenging the long-standing practice requiring the brokers representing home sellers to offer compensation to the homebuyers' brokers may upend the U.S. residential estate market as we know it. The plaintiffs in the case allege that the National Association of REALTORS® (NAR) Participation Rule, which requires listing brokers to advise buyer brokers how much they will be compensated for finding a buyer in order to list a property in REALTOR®-affiliated local Multiple Listing Service (MLS) broker marketplaces, is an antitrust violation that inflates seller costs.
As a REALTOR® for 30 years and President of NAR, I can emphatically state that nothing could be further from the truth, and I'm concerned about the negative impact these misrepresentations—and ultimately a verdict for the plaintiffs—could have on homebuyers and sellers across America. However, most Americans who are less familiar with the intricacies of the real estate market do not understand what's at stake, the magnitude of this trial and its potential implications for buyers and sellers who are already facing housing affordability and supply crises.
It all starts with local MLS broker marketplaces. Hundreds of these virtual marketplaces exist around the country as databases of all the homes for sale in a given market. That means a buyer can work with any agent participating in the local broker marketplace and get access to the widest selection of properties. Meanwhile, sellers get access to the largest pool of buyers. These marketplaces are by far the largest and most trusted resource to make the best and most informed decisions about buying and selling a property.
Because listing brokers and buyer brokers come together in these marketplaces, there is greater efficiency and equity for first-time, low-income and other homebuyers across the country. What's more, because the commission is shared between the seller's broker and the buyer's broker, first-time, low- and middle-income buyers get a better shot at affording a home and professional representation. If buyers had to pay their real estate broker themselves, it would make it harder for many Americans to afford a home because they would need more money upfront for the down payment, closing costs and agent fees. Or they could forego using a broker in one of the most complex and expensive transactions of their lives—a risky choice for even experienced buyers.
Without MLS broker marketplaces, there would be no dedicated home for all the verified, up-to-date listings. Information on homes would be inaccurate, unreliable and scattered across real estate sites. Buyers and sellers likely would have less choice among brokerages, services and compensation models because all those businesses would not have one place to come together. Instead, these marketplaces provide everyone with a means of entry to the same set of verified and complete housing information. That's because buyer and seller brokers are putting their most complete and up-to-date information into these centralized databases.
Real estate agents who know or have worked in other nations recognize that these local broker marketplaces in the U.S. create efficiency, equality and value for consumers. The U.S. operates in a free market with no hidden or extra costs or fees and with information that is accessible and accurate. Everyone can count on that kind of transparency to make the best choices in selling or purchasing real estate. Compensation is negotiable and can be negotiated at the outset or as agreed to by the parties at any time before the transaction closes.
Having access to MLS local broker marketplaces is what makes it possible for professionals like me to best serve both buyers and sellers, creating the most consumer-friendly market possible. And the beauty of it is that in the process, I can connect more sellers and buyers and create greater access to more homes for sale. It's a win-win all around.
To ensure the most consumer-friendly market possible, NAR's Participation Rule must be upheld for the sake of efficiency, transparency and accuracy. Greater cooperation among real estate professionals will always bring more buyers—particularly first-time, low-income, and first-generation buyers—to the table with sellers. And, at the end of the day, isn't this what we want, for more people to be able to achieve the American dream of homeownership?
For more information, visit https://www.nar.realtor.