Don't Let the Lawsuit Confuse You...Buyers & Sellers Need To Have Their Own Representation
Happy holidays! I hope this special time of year finds you healthy and in festive spirits. As you know, my monthly newsletter typically focuses on providing the latest in what’s happening in the real estate market.
But this month, I want to talk about recent headlines you have probably seen regarding the lawsuit against the National Association of REALTORS® (NAR). The suit, brought by a class of sellers, alleges a conspiracy to keep commissions high and awarded significant monetary damages. The decision is being appealed, which may take years. One of the potential outcomes being touted in the press is a change to the long-standing cooperation arrangement where the listing agent shares a portion of their commission with the buyer’s agent - including the option to not offer ANY compensation to the buyer’s broker.
The reality is commissions have ALWAYS been and CONTINUE to be negotiable. There has never been a fixed amount, and sellers have always had a choice whether to pay for their own representation or not (think For Sale By Owners) as well as whether and/or how much to offer to the buyer’s broker. For years now, Washington state has visibly published the compensation being offered in the MLS and public facing sites like Zillow & Redfin and allowed for that compensation to be zero. But the reality is that sellers who offer compensation to whomever brings the buyer experience less market time, a larger prospective buyer pool and higher final sales price. The data backs this up. But I'm not here to justify my compensation. It's just good business sense for sellers to offer compensation and, what they choose to offer can be negotiated as part of their listing agreement with their listing agent.
This cooperative compensation agreement is also in the best interests of BUYERS. But to understand this requires a quick history lesson. Before the 1990s there was no such thing as a buyer’s agent. Agents not directly representing the seller but perhaps showing a buyer a property were known as sub-agents and had a legal obligation and fiduciary responsibility to serve the SELLER’s best interests. Buyer agency was established to ensure buyers, too, had their own representation, someone advocating for their needs and best interest versus expecting they could receive that same level of care from someone working for the seller.
Since its inception, the offer of cooperating compensation has helped ensure maximum exposure of the seller’s property to the largest pool of prospective buyers.
Buyers’ agency ensures qualified, informed, and capable buyers are in a position to contract and follow through on a purchase transaction. My concern in the wake of this ruling, is this: if a seller is not offering compensation and a buyer cannot pay their broker themselves, they may decide to not see the property at all or enlist the help of the seller’s agent to make an offer on it. Remember, buyer agency was created to avoid exact this scenario. It would be like a defendant hiring the prosecuting attorney to represent them in a court of law. There’s an inherent conflict of interest and buyers deserve their own representation.
Additionally, there is an entire pool of buyers who are struggling enough to come up with their down payment and closing costs and simply cannot afford to pay their broker on top of this. Furthermore, VA buyers are prohibited entirely from paying real estate commissions. While an offer can request that seller pay buyer broker in a competitive scenario, this may weaken the offer. So, my fear potentially less prospective buyers for a seller’s home and/or buyers without their own representation, creating potential liability for all parties.
Having your own representation is invaluable and I would not recommend a buyer try to go it alone. Here’s an example. Last week I closed on a transaction where after two days of back and forth, I helped negotiate a below list, price offer. Then, halfway through the escrow it became known that the subject property was encroaching on the one behind it. A significant section of their fence ran across the neighboring property line. This was a serious issue that threatened to blow up the sale. The seller was adamant it was not their issue to address, and I of course disagreed.
Given my experience and access to resources I was able to advocate for my client and negotiate a successful solution. Without representation, these buyers would not have known how to handle the situation, couldn't reasonably be expected to ask the listing agent to do something contrary to the sellers’ interests, and stood to potentially lose their earnest money if they backed out. Agency representation for both buyers and sellers is critical and each deserves their own. Compensation to both listing and buyer agents is equally critical. It will be interesting to see how this all ends up.
In the meanwhile, I’m here to continue providing exceptional service based on years of experience in this complex market and advocate for your needs - whether you’re a buyer or seller – and to ensure YOUR success. Cheers and have a wonderful and healthy holiday season!
Call/text 425-495-0926 - or email me anytime! ginam@windermere.com.
