How the NAR settlement impacts Georgia real estate
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The National Association of Realtors recently agreed to settle a big lawsuit that questions how real estate agents are paid — and who foots the bill.
The big picture: If approved, information about how much an agent could earn from a sale would be verboten in the MLS, the database where real estate agents post homes for sale. The policy would take effect this summer.
Why it matters: The seemingly small change, which a court preliminarily approved late last month, is causing major confusion.
How it works (currently): Sellers and their broker negotiate a fee, and that broker decides how much profit they want to share with the buyers' agent.
- That number is advertised in the MLS listing, and the seller pays both agents from the home sale earnings.
- Many are concerned this causes buyers' agents to steer clients toward homes offering higher commissions.
What would change: If the settlement is approved, offers of compensation will not be listed in MLS. Buyers and their broker will negotiate how much the broker should earn — and how they'll get paid, antitrust lawyer Brian Schneider says.
- Georgia is one of roughly 20 states that already require so-called buyer's agreements. Increased transparency around agent profits could lead to more competition, he says.
Between the lines: Supporters of the change say that it would allow realtors who can effectively communicate their value to command higher shares.
Caveat: Realtors could still pick up a phone to discuss compensation with buyer brokers or list the information on their personal websites, according to the Georgia Association of Realtors' legal analysis.
By the numbers: The median wage for Georgia real estate sales agents in 2023 was $48,580, according to BLS data. Georgia is one of several states with high rates of agents per 1,000 jobs.
What we're watching: Many are worried about cash-strapped, first-time buyers. Most can't pay their agent out of pocket, but they'll be "financially slaughtered" without representation, former Zillow exec and Tomo cofounder Greg Schwartz says.
- For that reason, sellers aren't entirely off the hook, and will likely offer concessions to cover buyer agent costs, Faron King, a VP with NAR, tells Axios.
What's next: "[Real estate] is in the greatest state of disruption I've seen in the last decade-plus," Schwartz says.
- Schwartz and other observers see opportunities for new business models to emerge, from paying an agent hourly to ChatGPT-like agent bots.
- He expects minimal innovation in the short term, but radical change over the next five to seven years.