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VOLUME 27, ISSUE 6 | OCTOBER 2022
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Written by RIKI MARKOWITZ / Contributing Writer
Commission Transparency Should Be the Rule, Not the Exception Presorted Standard U.S.. Postage PAID Austin, Texas Paid Permit #715
You may recall back in 2019 a slew of headlines frantically fear-mongering the potential end of the residential real estate industry as we know it. Obviously, the industry has not only survived its possible downfall, but it continued on a trajectory of explosive sales and inflated prices that coincided with exceptionally low inventory. Here’s what happened: A homebuyer in California filed a class action lawsuit against the National Association of Realtors (NAR) and a slew of some of the largest global real estate companies. The plaintiff alleged that NAR and its co-defendants violated the law and, essentially, conspired to gouge consumers by inflating commissions and hindering — if not eliminating — competition. The suit stated that sellers incur an inflated cost on real estate transactions because they’re primarily responsible for paying the commission to the seller’s agent and the buyer’s agent. It goes on to say that the cost to sellers would be much lower if buyers paid a commission to their own buyer’s agents. Over the course of the lawsuit, the Department of Justice (DOJ) has asserted that NAR “put illegal restraints” on competition in the residential real estate industry by concealing commissions collected by buyers brokers, even going as far as declaring their services are free. While buyers may not pay a commission to the buyer’s broker outright, sellers typically calculate the commission into the cost of the property. The DOJ also charged that the industry made it too easy to quash competition by filtering listings based on the amount of the commission and even limiting access to listings to certain brokers and agents. Essentially, the plaintiff’s charged that if NAR committed to full transparency, compensation for brokers and agents would go down and consumers would save a lot of money. While this and additional similar lawsuits have seen their fair share of twists and turns, one big takeaway for professionals is that consumers were demanding more transparency. When a buyer or seller feels like their broker is concealing the amount of their
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