May 4, 2024 - Real Estate

How the NAR settlement impacts real estate in D.C.

Illustration of a set of keys with a percent sign keychain

Illustration: Sarah Grillo/Axios

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, come summer, agents won't be able to make offers of compensation in the Multiple Listing Service, the database where real estate agents post homes for sale.

Why it matters: The seemingly small change, which a court preliminarily approved in April, 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 that offer them higher commission.
  • The bulk of compensation offers are 2-3% for a buyers' agent in the DMV, though it can range from 0% to a dollar amount, Bright MLS Chief Economist Lisa Sturtevant says.

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.

  • Increased transparency around agent profits could lead to more competition, he says.

The intrigue: Listing cancellations were up nearly 69% in D.C. for the week ending April 14, per Bright MLS data.

  • Some Washington sellers may wait to list, especially if it means keeping more cash in their pockets down the line, Sturtevant says.

Yes, but: 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.

Buyers' agents aren't going to work for free.

  • Sellers will likely offer concessions to cover buyer agent costs, Faron King, a VP with NAR, tells Axios.

Between the lines: Most predict the agent pool will thin out, as agents who can't communicate their value won't prosper in the post-settlement world.

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 short term, but radical change over the next five to seven years.

More from Axios:

June could be the new best month to list a DMV home

Why more people are buying houses with their friends

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