LAWSUIT OVER COMMISSIONS

If you have been following out industry’s news, you may be aware of a lawsuit regarding real estate agent's representation and commissions.  The suit filed in April 2019 brought into question the responsibility of sellers to pay the buyer’s agent’s commission.  A verdict was delivered in October 2020 and some settlements are currently being made.  Though it is uncertain how and when, a change is most likely coming for our industry and we have and will be watching as things develop.

Let’s briefly review the past and ask some questions regarding agency, representation, and commissions paid.

I have been in this business for 44 years, and for the majority of that time agents assisting buyers were paid by the seller.  With no overriding relationship/contract with the buyer their fiduciary obligation was to the seller. But, was that what was really happening?

In the early 1990’s along comes “Buyers Agency”.  This new arrangement declared that the agent assisting the buyer is their representative and moves their fiduciary obligation from the seller to the buyer, as is should have been.  Despite this shift, the buyer’s agent's as well as the listing agent's commissions were still paid by the seller. 

What is being suggested now is the division and clarification of agency and payments by buyers, sellers, and their respective agents.  A buyer picks an agent, negotiates the terms of a contract, and moves forward.  A seller would do the same.  This makes sense and would define all parties with payments made by those receiving the services of their agent.  

But, how do we get there?  When “Buyer’s Agency” was implemented in the early 1990’s,  I would say it took 5-7 years for the public and agency community to fully understand and accept this practice.  This new shift will be a much larger change.

Many new documents and protocols will have to be developed and implemented. Agents will have to be educated on this process as well as the public.

Then there is the question of how this affects the mortgage industry.  How will the buyer come up with the fee paid to the buyer’s agent?  Most don’t have it in their budget or have it at all?  Does this mean lenders will build it into the loan?

We are obviously watching this very closely and if anyone wants to discuss this shift, please feel free to call me, 314.721.4755.

We have been in business for 90 years and are prepared to pivot and adjust to any decision modifying practice and protocols.