Friday, March 29, 2019

Fallout Possible from NAR/Brokers Suit

A lawsuit naming a handful of large national brokerages and the National Association of Realtors® as defendants has possible class action potential. The suit alleges commission rigging among other things. Washington State was not involved nor were most states, our state has statutory regulation on negotiating commission in real estate.

As is typical lawyers will make a lot of money, plaintiffs will make very little and legislators will freak out and do something stupid. Locally here is the deal: Washington State law stipulates that real estate commissions are not fixed by law or other regulation and are freely negotiable between the brokerage and the seller. Furthermore the lawsuit alleges that seller's should not have to pay for the buyer's agent commission (they do not have to in Washington State but often do for various reasons that are beneficial). This on the surface may seem reasonable but one must first study the ugly history of real estate to understand why we list on the multiple listing service and how that has had a very positive consumer benefit.

100 years ago the notion of an organized system of sharing listings started to pick up in popularity, but it wasn't until the 1970s that the modern system really took off. Years ago before there was a truly organized multiple listing service (MLS). Brokers would offer to list a home and then employ their own salespeople to sell the listings. Sound familiar? Automobiles perhaps? Yes that is exactly how it worked, brokerages were like car lots trying to get buyers to buy what they had listed. Just like competing car dealers, things could get a bit testy and often sales people would deviate from good decorum to get the sale closed. There was no system to properly allow a broker from one agency to sell a listing listed by another agency so they basically tried to sell their own listings. Very few agents were interested in helping buyers, they wanted listings. Why? Because a listing would get them paid, a buyer might not unless they bought a listing from within the firm.

The modern multiple listing service allows agents to freely show any and all properties listed regardless of which brokerage has the property listed and the buyer's agent is assured of being paid whatever fee was negotiated for them by the seller and listing agent for services rendered. The advantage to the seller is that all of the area real estate agents are exposed to his/her listing rather than just a few at the office holding the listing. The MLS also allows smaller independent brokers to operate against the larger national companies. This suit if successful will likely help the big national companies rather than hurt them. Removing the traditional MLS system in favor of one that has buyers hire their own Realtor® at their own expense will plunge us back into the dark ages of shady horse traders and bad consumer experiences. Buyers are already strapped for cash to close deals they certainly don't have the money to pay for real estate services. So buyers will go directly to the listing agent who is of course morally and statutorily obligated to the SELLER, read: buyer beware.

Short of a few dirty rotten scoundrels, the real estate system employed throughout most of the country is rock solid and beneficial to ALL parties. Go after the few bad guys, lock them up, throw away the key and leave our perfectly fine system alone.

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