The split-decision by
The initial
This Justice Department 2-to-1 win in the U.S. Circuit Court of Appeals for the District of Columbia, overriding a provision that kept it from further investigating NAR, could now spill over into
Since the latter agreements were announced, various workarounds regarding the payment of buyer-broker compensation have been posited that keep current practices in place, said Ryan Tomasello, an analyst with Keefe, Bruyette & Woods in his April 7 note on the court ruling.
"While there has been some debate around whether the DOJ has already signed off on the NAR settlement behind the scenes, we do not believe that the agency has given its approval, and that NAR was taking a chance in settling under the hope that the DOJ would not be permitted to intervene," Tomasello said.
Tomasello expects the Justice Department to intervene in the Sitzer/Burnett agreement. It would be looking to eliminate any loopholes or workarounds such as commission offers made off of the multiple listing services in order to make "more impactful changes" to this practice of the seller paying the buyer's broker commission.
"Should the DOJ look to remove the off-MLS compensation workaround now that it is unconstrained, we believe this would result in the broader settlement changes being much more disruptive for the industry, including downward pressure on buyer agent commissions," he continued.
On the other hand, the Sitzer/Burnett settlement agreement was a prudent action for NAR to take in light of the D.C. court's ruling, said Marty Green, a principal with the law firm of Polunsky Beitel Green.
"While the Department of Justice is not bound by the terms of the private action settlement that NAR recently reached, the fact that the NAR has agreed to alter many of the business practices that may have been of concern to the DOJ should increase the possibility of a speedy resolution of any governmental enforcement action," Green said. "NAR would probably prefer to have the DOJ bless the settlement in any event, so perhaps this development increases that possibility."
The Sitzer/Burnett agreements also have mortgage lenders looking at possible impacts on their customers,
"There are certain no-money-down loans home buyers can get that don't allow the buyer to spend any money out of pocket," said Steven Andrews, a real estate investor and founder of Soarx Consulting, in an email. "So what's going to happen is, sellers are going to say that if buyers need them to pay for their agent's commissions, then the price of the home has to go up to cover that cost."
The average commission on a real estate transaction at this time is 5.49%, a recent study of 630 partner agents associated with Clever Real Estate found. The report also analyzed other data sources. That is split between the listing agent at 2.83%, and the buyer's representative at 2.66%.
But there are variations in compensation, state-level data shows.
The lowest average commission is in Hawaii, at 4.78%, followed by Delaware at 4.88%.
West Virginia had the highest commissions at 6.67%, followed by Mississippi at 6.07%. The only other states where commissions averaged 6% were Alaska, Kentucky and Wyoming.
"Realtors charge higher or lower rates based on local norms and market conditions," the Clever report pointed out.
A section of the online report did mention the Sitzer/Burnett agreement.
"This settlement aims to keep cooperative compensation flexible for buyers and sellers," wrote the authors of the Clever report Bailey Peterson & Steve Nicastro. "While the full impact of the settlement is yet to be determined, experts believe that the change will eventually lead to lower buyer's agent commissions and give buyers the ability to negotiate those commissions based on the services they need."
