You are currently viewing Buyer Agent Commission Disclosure NAR DOJ Case and Settlement Agent On Duty Episode 003

Buyer Agent Commission Disclosure NAR DOJ Case and Settlement Agent On Duty Episode 003

Episode 3: Here are the links to read the Department of Justice press release and view the National Association of REALTORS video by NAR 2021 President Charlie Oppler:

DOJ Press Release

NAR Post and Statement

#003 – Buyer Agent Commission Disclosure NAR DOJ Case and Settlement Agent On Duty Episode 003

Welcome everyone to Episode Three of the Agent On Duty podcast. I am John Marion and I am the Agent On Duty. The audio content for this podcast is taken from a video that I just recorded about a lawsuit that the Department of Justice filed against the National Association of REALTORS®, and they came to a simultaneous agreement, but let’s get right into that audio.

Okay everyone, John Marion here with a very interesting piece of information that we heard about a few days ago.

So on the screen, if you’re watching on video and I’ll explain this for those that aren’t don’t have access to the video, is a suit, really a lawsuit, that the Department of Justice filed against the National Association of REALTORS®. And this was filed on November 19th, but evidently the National Association of REALTORS® has been in a conversation for some time – I don’t know how long – with the Department of Justice regarding the situation and of disclosing real estate commissions that are paid to buyers agents.

Background Info About Real Estate Commissions

So let me give you a little bit of background and then I’ll talk a little bit about this case and show a video from the President of the National Association of REALTORS® that you can listen to what he has to say about this case.

So evidently, the Department of Justice has made some accusations against the National Association of REALTORS® and the National Association of REALTORS® have said very clearly that they reject the characterization that the Department of Justice has made against NAR.

But in the spirit of, you know, being cooperative and, having rules that, work in the best interests of the REALTOR community and buyers and sellers, they are going to make a rule change and this change will take place sometime after the new year new year. I think they have about 60 days to get this settled in and change the rules that the NAR has regarding commissions paid to buyer’s agents.

And so the way it works now, and the way it’s going to continue to work presumably is that, when a home owner puts their house on the market, they sign a listing agreement with a broker and the commission is established in that listing agreement. There’s a commission agreement within the listing agreement of how much commission the seller will pay to the broker.

And there’s also a, an explanation of how much commission that the seller pays to the broker will be shared with another broker who has a buyer for that property.

So to make a long story short, the way it normally works – And most of the transactions that I see that occur – is that a homeowner lists their home, signs an agreement with a broker and quote unquote, it’s usually 6%, but it can be any commission that both parties agree to. But let’s just say it’s 6%, most of the time, which in my experience, it seems to be that way.

And so that broker, the listing broker, agrees to share half of that commission with another broker that brings the buyer. So 3% of that, half of that 6% or 3% of the of the purchase price is paid to the buyer’s broker as their commission.

And this is disclosed among us as agents. So when I go on the MLS system, I can see all the homes where there’s data that’s available to us as agents that’s not available to the public. And so the Department of Justice is telling the NAR that this must be disclosed. How much is the buyer’s agents going to make? It should be publicly disclosed so buyers can understand what their agent is making on the transaction.

And so normally – not normally – but many times when commissions are explained to home buyers, it’s explained that they don’t have to pay a commission because we get the commission from the listing broker who shares it with our broker. And then I would get a commission check if I was representing the buyer in that transaction.

And sometimes we say, well, it’s free. We’re representing you. It doesn’t cost you anything it’s free for you, but we are getting paid by the seller who’s paying the broker and that’s how a buyer’s agents get paid.

Disclosure of Buyer’s Agent Commission

So there will be a prohibition of us as agents saying, “Oh, it’s free.”

We have to disclose that there is a commission that’s being paid. And the commission we can explain, of course, where the commission comes from. The buyer doesn’t have to reach into their pocket and pay it, but it is obviously a part of the cost for a seller to sell their home and to pay that commission. And that goes to the buyer’s agent.

So anyway, the Department of Justice is requiring now that the NAR disclose this information. That should be a fairly easy fix. There’ll be some guys that work in the background and the database of the MLS system to figure out how to click a button or whatever, to make sure that, that, previously private information among agents is now going to be public information for buyers to understand what the buyer’s agents will be compensated on any particular transaction.

And it’s not always 3%. It could be more. Many times more than more it’s less so maybe two and a half percent or 2% or whatever it is. Sometimes it could be a flat fee, a flat dollar amount, whatever that is, that information will be publicly disclosed.

And again, the NAR has said very clearly that they’ve done no wrongdoing, but on this particular point, they are in agreement that, they’ll disclose this information and I don’t see any harm done with that.

I think that’s probably a good thing for the public to know about because it is kind of like weird. People don’t understand how it works, and it’s always an explanation of how commissions work. And I don’t think buyers really understand how that works. And I think more disclosure is good.

I don’t know how this is going to change anything about the real estate industry or commissions that are paid to brokers. The costs of selling homes are going to remain the same as far as what the actual costs are. So this should put home buyers in a position of possibly negotiating commissions with their agents.

So I don’t know if it will really happen because normally it’s not negotiated. The, the seller is offering the money, putting the money on the table before the buyer even gets involved in seeing the home. Those documents are signed before the home is even listed. So it’s more that the buyer is aware that their agent will collect so much money in commission if they sell this home. And so there’s really not so much negotiating power, for the consumer, but it’s good information for them to have.

Now what happens sometimes – and an agent signs an agreement with a buyer, there is a provision, at least on the Georgia association of REALTORS contract, to indicate that if the seller’s broker does not pay a full 3% commission, that the buyer agrees to pay the difference. And most of the time I have never filled that they would have to pay the difference.

I mean, if I can collect 2% or two and a half percent on a transaction, you know, that’s okay. As buyer’s agents, we’re not always happy with that, but that’s part of doing business. It’s a volume business.

Most of the work of selling homes really falls right on the shoulders of the buyer’s agents that show homes, multiple homes, to their clients. It’s very time consuming. And so on that side of it, I think there’ll be a lot of resistance for agents to really, reduce – consistently reduce – their 3% commission that they expect down to two or one and a half or something low.

Negotiating Real Estate Commissions

I think on the seller side, they have more negotiating power upfront before the listing agreement is signed to negotiate. And instead of paying a 6% commission agree to a 5%, 4% or deep discount, if it’s a deep discount brokerage service, or if the broker offers deep discount services. So that’s really where I think the, the commissions will be negotiated. It will be on the seller side, but buyers will benefit by knowing, what the commission is.

So I’m going to give you the links down below. If you’re watching the video will be in the text. If you’re listening on audio, you can, look in the description. I will provide a link where you can go to access these different documents that I’m going to show.

So this is basically, the lawsuit that the Department of Justice filed against the National Association of REALTORS®.

It’s a four pages. And again, you can see on the top here, it was filed on November 19th, 2020, it’s a four page document.

DOJ Press Release

The Department of Justice has news about this, a press release for immediate release on Thursday, November 19th, 2020.

Justice Department Files Antitrust Case and Simultaneous Settlement Requiring National Association of Realtors® To Repeal and Modify Certain Anticompetitive Rules

Settlement Will Increase Competition to the Benefit of American Homeowners and Homebuyers and Allow for Innovation in Brokerage Markets

So, I mean, all that sounds good. Innovation in brokerage markets. I mean, the name of my company is Innovative Properties Group. We love innovation!

So on the top of the Department of Justice press release, there’s part of our brokerage name! So I like that – I like the idea of being innovative.

There is a lot of, you know, a lot of conversation – and I’ll get into this maybe in another video or podcast at a future date – about where real estate commissions might be going and For Sale By Owner homes and those types of transactions where agents are not involved in or where there’s deep discount brokerage services.

NAR Statement and Video

Here is the blog post from the National Association of REALTORS®. And again, this will be in the links that I’m providing as well. They announced that:

“2020 NAR-DOJ Agreement Regarding MLS Rules”

That’s a multiple listing service rules. And they give a summary of the outcomes and what happens next. But I’m going to show this video from a NAR president, Charlie Oppler, so you can listen to what he has to say.

I’ve got a speaker that I’m going to put up to the microphone, and hopefully this will work and the audio quality will be good. If it does not work, I’ll have to do some editing, but we’ll see how this video comes out and see how the audio comes out.

President of the National Association of REALTORS®

Hello, I’m Charlie Oppler, The 2021 President of the National Association of REALTORS® today. The National Association of REALTORS® reached an agreement with the United States Department of Justice, DOJ to make certain changes to the code of ethics and the MLS policies regarding providing information about commissions and MLS participation. While our rules and policies have created a competitive and efficient market that benefits home buyers and sellers, we sometimes engage with government entities to ensure that any IRS rules are kept current and promote those goals grounded in our commitment to act in the best interest of buyers and sellers. We regularly update our rules and policies to protect consumers and provide transparency in response to questions from the DOJ, we have been working to explain our rules and we have reached an agreement that fully resolves the questions raised by the DOJ about the MLS system and commissions. We want to be absolutely clear while NAR disagrees with the DOJs characterization of our rules and policies, and NAR admits no liability wrongdoing or truth of any allegations by the DOJ.

NAR has agreed to make certain changes to its rules, to address the questions raised by the DOJ. This agreement allows NAR to remain focused on supporting you our members, as you preserve, protect, and advance the American dream of home ownership. Furthermore, the agreement does not subject NAR to any fines or payments. Here’s what you need to know about how it will impact you and your business. Although final language of the rules will be determined by NAR board of directors. Most of the changes seek to more explicitly state. What is already the spirit and intent of NAR code of ethics and MLS policies regarding providing information about commissions and MLS participation. Number one, in accordance with MLS systems, long-standing focus on creating an efficient, transparent marketplace for home buyers and sellers. The amount of compensation offered to buyer’s agents for each MLS listing will be made publicly available, publicly accessible MLS data feeds will include offers of compensation and buyer’s agents will have an affirmative obligation to provide such information to their clients for homes of interest.

Number two, the rule changes reaffirm that MLS is in brokerages as always must provide consumers, all properties that fit their criteria regardless of compensation offered, or the name of the listing brokerage number three, while NAR has long encouraged buyer’s agents to explain how they expect to be paid. Typically through offers of cooperative compensation from seller’s agents, there will be a rule that more definitively States that buyer’s agents cannot represent their services as free to clients. And finally, with the sellers prior approval, a licensed real estate agent will have access to the lockboxes of properties listed on the MLS. Even if the agent does not subscribe to the MLS, we expect these changes to take effect in about 60 days during which time they will be subject to approval by both our board of directors and the DOJ for additional questions, please refer to the FAQ’s and other information that will be made available on If your question still has not been answered contact Katie Johnson and AR general counsel and chief member experience officer or Leslie [inaudible] and ARS deputy general counsel, thank you for your time today.

MLS Non-Member Agents and Lockboxes

Okay. So that’s interesting information. That last part of that announcement brings up another interesting issue about the lockboxes: the access that agents have to get into a home.

And so they mentioned agents and brokerages that are not part of the MLS system. They, they should still have access to the lockbox. And, so I’m not sure how that’s going to work. The way it works in my market is most of the agents, use what’s called the Supra lock box, and there’s a special key. And I have to go down there, identify myself, when I get my license, I go through a security check and a background check and all that kind of stuff. And they will not issue me a key until I have all my paperwork in order and everything is, is right.

And you don’t need to be a REALTOR to have access to those lockboxes, but I thought that you had to be a member of the MLS system. So Charlie Oppler is saying that the Department of Justice is requiring that the NAR make the lockboxes available to not only agents who are not realtors, but also agents that don’t subscribe to the MLS system.

So that, that sounds kind of weird to me. I’m not exactly sure what that’s about. So I’ll get clarification on that and maybe post more content about that later. But right now, the way the system works, I think is very good concerning lock boxes. And so the lock boxes: we know who’s opening them, they’re electronic. Every time it’s opened, we as a brokerage get notified who opens that box, what time they open it and who that person is.

And so we can trace who’s opening the lockbox and presumably then entering the home.

So anyway, that’s an interesting addition or part of this settlement that National Association of REALTORS® has made with the Department of Justice.

Podcast Conclusion and Comments

Do you have a comment about that? Leave that in the comments below, or log onto my website, my blog post about this.

and leave a comment.

I’d like to know what you’re thinking.

If you’re a licensed agent, or if you are a member of the public, who’s not a licensed agent and you have something to say about this I’d love to hear what that is and we’ll be glad to answer any questions that come up.

So that’s all for now.

Thank you everyone for tuning in to this episode of the Agent On Duty.

I am John Marion and I am the Agent On Duty.

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