NAR's rule changes have hardly budged commissions, Redfin says

Major rule changes around real estate broker commissions haven't disrupted the buying and selling process, a Redfin study finds. 

Compensation for agents has only dipped slightly since the National Association of Realtors implemented rule changes in August, according to Redfin. The findings come as objections to massive settlements by NAR and other real estate players mount ahead of a November court hearing to finalize the nearly $1 billion in agreements.

The average buyer agent commission for homes sold in October was 2.34%, according to Redfin. It was just 1 basis point higher in August, and just 17 basis points lower than it was two years ago. 

The digital brokerage only analyzed commissions sourced from its partner agents, or from transactions involving its Bay Equity Home Loans brand. The company's own agents weren't included because of their more competitive fees, Redfin noted, and data from Multiple Listing Services were excluded.

NAR's settlement prohibits offers of compensation from appearing on any MLS, although they can still be negotiated off the services. Under the new rules, agents must also enter into written agreements with buyers including revised compensation disclosures. 

Housing finance experts shared numerous theories as to what would unfold following the updates, although presumed trends such as a rise in dual licensed agents haven't arisen yet. Redfin reported agents seeing more negotiations over who will pay the buyer's agent, but sellers are still paying them, albeit at smaller amounts. 

"If you're a seller, reducing the commission isn't something you can save on right now," Andrew Vallejo, a Redfin agent in Austin, Texas, said in the press release. "That's because the buyer may not be able to afford your house if they have to pay their agent out of pocket as well."

Consumers still face significant affordability hurdles in today's market, with mortgage rates inching closer to 7% and lofty home prices despite softening in some regions. Limited housing inventory has combined with those factors to keep the "lock-in" effect intact.

Buyer-side agents meanwhile are netting slightly higher commission rates for homes $500,000 and under, Redfin reported. Their payouts rose slightly from 2.41% in August to 2.43% in October. As prices rise, the compensation share falls: buy-side brokers on homes $1 million and greater have seen their commissions fall 14 basis points in two months to 2.11%.

Settlement opposition grows

A Missouri federal judge is scheduled to approve settlements including the $418 million NAR deal in a few weeks, which would also clear real estate brokerages with $2 billion or less in annual transaction volume of liability. The agreement has left some consumers unsatisfied, particularly regarding a perceived lack of enforcement and wiggle room for workarounds. 

Tanya Monestier, a class member and professor of law at the University of Buffalo, filed a 136-page objection to the settlement this week describing those workarounds. One involves buy-side brokers modifying their representation agreements to increase their compensation from a home seller, once that burden is lifted from a buyer. 

"In this respect, I don't think this is a "workaround" so much as a flat-out breach of the agreement," wrote Monestier. The professor cites three state Realtor associations which allow for agent "bonuses" similar to the purported workaround compensation. 

The lengthy filing also targets an alleged lack of enforcement, with class plaintiffs' attorneys and NAR being responsible for ensuring compliance by brokers. 

"We are largely leaving enforcement of this settlement to a handful of plaintiff's lawyers who will benefit … so long as meaningful problems don't arise with the settlement," wrote Monstetier. 

Law firm Knie & Shealy also filed an objection on behalf of a proposed class of South Carolina-based home sellers, regarding those smaller brokerages insulated from punishment. Just one brokerage in South Carolina was above the $2 billion threshold and had to choose between a settlement amount determined by either a formula or mediation, or to continue to fight the claims. 

"In other states, it is certain that there were no such brokerages," the attorneys wrote. "This settlement leaves those states with wrongdoers who will not be punished, despite having made

substantial profits at the expense of residents of those states."

The nation's leading real estate brokerages have agreed to settlements of at least $998 million, according to plaintiffs' attorneys. Counsel is seeking one-third of the $679.2 million from the NAR and HomeServices of America settlements alone. 

Attorneys say their work spanned over 107,000 hours in the past five years across four major class action lawsuits, and that they've advanced over $16 million in out-of-pocket costs. The hearing will be held Nov. 26 in a Kansas City, Missouri federal courtroom.