I
t's been one year since the Sitzer/Burnett case shook the real estate industry, promising to overhaul the system of agent commissions. Since then, dozens of lawsuits have been filed, followed by settlements worth over $1 billion, policy changes, and widespread anger. The question remains: will commission fees ultimately decrease? Some data suggests a small-scale decline, but it's too early to tell if agent pay will meaningfully drop.
The verdict sent shockwaves through the industry, with leaders still trying to determine its impact and chart a new course forward. In the aftermath, copycat lawsuits were filed, and settlement agreements led to significant changes in the National Association of Realtors (NAR). The NAR ultimately settled for $418 million and agreed to practice reforms.
The verdict also caught the attention of mainstream media, potentially encouraging consumers to negotiate agent pay. Over 600,000 claims have been filed by home sellers seeking a share of the settlement fund. However, from a compensation perspective, little has changed so far.
Michael Ketchmark, lead attorney for the home sellers, believes that many real estate professionals are still adapting to the new landscape. He notes that it may take time for change to occur and suggests that it could be a "generational shift" before agents adjust to the new rules. Ketchmark also thinks that the industry has become more free and open, with agents who can show their value seeing opportunities.
Steve Brobeck, senior fellow of the Consumer Federation of America, expects buyers to negotiate commission rates down and for some sellers to refuse to compensate buyer agents. He predicts conflicts between agents trying to honor new rules and those refusing to do so. If the U.S. Department of Justice intervenes, more agents may accept the new rules.
The National Association of Realtors has undergone significant leadership changes in the past year, including the departure of its president, chief legal officer, and CEO. Despite this, NAR membership remains around 1.5 million. The organization has largely left implementation of the settlement up to others, providing guidance and resources for real estate professionals and consumers.
Multiple listing services (MLSs) have faced a "massive undertaking" in updating their systems to comply with the new rules. Art Carter, CEO of the California Regional Multiple Listing Service, notes that the removal of commissions from the MLS has been a significant game-changer, requiring agents to adapt and change their mindset.
Brian Donnellan, CEO of Bright MLS, is impressed with how MLSs have handled the changes so far. Agents are generally following the rules when listing homes on the MLS. However, Donnellan is concerned about unintended consequences from the verdict and expects more litigation in the future. He believes that real estate will eventually settle into a new normal.
