Proposed Settlement Would Have Undercut Class Action Antitrust Lawsuits A CFA analysis of the proposed settlement noted several ways that agents could easily thwart the intention of the fee disclosure. But it would not have given buyers the ability to negotiate these commissions.
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The proposed settlement would, depending on the effectiveness of the buyer agent commission disclosures, have discouraged steering. In England, by comparison, real estate agents typically receive less than two percent for facilitating the sale of a home.
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Even then, the agent usually receives at least $20,000 in commission on the sale of a $400,000 home. Listing agents, though, will sometimes cut one-half or one percent off their commission if the home is expensive, they are the sole agent involved in the sale, or if they help a consumer sell their home and purchase a new one. A large majority of commissions range from five to six percent and are the same in a particular area. “As a result, commissions remain high and fairly uniform,” he added. “Real estate agents compete vigorously for clients but not by offering lower commissions,” said CFA’s Brobeck. While sellers ostensibly have the ability to negotiate the commission they pay to their own agent, research by CFA shows that when home sellers ask agents whether they would lower this commission, three-quarters refused to do so. If asked, their agents will correctly inform sellers that if they offer a low buyer broker commission, buyer agents may steer prospective buyers away from their property. On the other hand, sellers have little ability to negotiate the commission rate down. Buyers not only cannot negotiate this commission but usually are not aware of its level because buyer brokers either do not discuss it with them or inform them that it is paid by the seller. Sellers and their listing agents decide the commission to be paid to the buyer broker working with the home purchaser. This rule institutionalizes a very strange and anti-competitive method of broker compensation. The key barrier to price competition is the NAR’s buyer broker commission rule that requires all brokers to make a blanket, non-negotiable offer of buyer broker compensation to participants in the MLS. Proposed Settlement Would Not Have Created Price Competition
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“This opportunity would only occur if buyer and seller commissions were uncoupled, the main goal of class-action lawsuits that have advanced in the courts,” he added. “Although the proposed settlement would have given buyers more information about buy-side commissions, it would not have given these home purchasers adequate opportunity to negotiate these fees,” noted CFA’s Brobeck.
CLASS ACTIO REAL ESTATE AGENTS FREE
The key elements of the proposed settlement were that (1) brokers were to make the commission offered to buyer agents on multiple listing services (MLS) publicly available, and (2) buyer agents were prohibited from representing their services as free to consumers.
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“This withdrawal by the Department of Justice is good news for consumers for two reasons: first, the proposed settlement would not have significantly advanced price competition in a marketplace with high, fairly uniform commissions and second, the settlement threatened to undercut several class-action lawsuits that seek to remove the most important barrier to price competition,” stated Stephen Brobeck, a senior fellow at the Consumer Federation of America (CFA). Department of Justice’s Antitrust Division announced that it was withdrawing from the proposed settlement with the National Association of Realtors (NAR) “to permit a broader investigation of NAR’s rules and conduct.”