What Just Happened?

The National Association of Realtors (NAR) has entered into a proposed settlement agreement about real estate commissions. The proposed settlement agreement has not been finalized, but if it is, it will be a settlement of commission-related lawsuits. There are nationwide implications to these class action lawsuits known by a variety of names. Defendants have included a variety of real estate brokerages, MLS operators, and the National Association of Realtors.

This blog post is a summary of a complex and constantly changing set of proposed settlements and lawsuits with numerous industry participants. Download our white paper, The NAR Settlement & San Francisco if you’d like our full 16 page deep-dive into this hot industry topic with implications for San Francisco home sellers and home buyers:

If Approved, What’s The Big Change?

If approved, the settlement, taken as a whole, ends the requirements of a blanket offer of compensation paid for by the seller to a buyer agent that has been enforced through MLS rules and membership requirements. Cooperative offers of compensation have not been banned, but an MLS can no longer publish information about cooperative offers of compensation. When selling a home, a seller may continue to offer sale concessions or other incentives that an MLS can continue to publish (as most already do). There are additional details, but this is the heart of the settlement.

The settlement is not an admission of wrongdoing or guilt. Commission rates are not set by law nor the NAR and continue to be fully negotiable.

The Road Ahead For Real Estate

How Did We Get Here?

Lawsuits. In 2019 several real estate brokerages and the National Association of Realtors, (abbreviated as NAR) were sued by homeowners named Moehrl, Sitzer, and Burnett in different lawsuits in different courts over real estate commissions. The initial lawsuits eventually became consolidated into class action lawsuits covering two distinct geographies while still being known by the original plaintiff case names: Moehrl and Sitzer/Burnett.

Questions and Answers For Home Sellers:

Q: Will I Still Sign a Listing Agreement to Sell my House?
Yes. You’ll still sign a listing agreement with a real estate brokerage to sell your house. That broker will still most likely list that home in the MLS to advertise it to the widest audience and comply with fair housing laws. Standard listing agreements will be very similar to what exists now and will be updated with new language to accommodate the settlement’s requirements.

Q: How Much Will I Be Charged In Total Commissions?
Commision rates continue to be negotiable. NAR affiliated agents will no longer require sellers to make a blanket offer of compensation to a buyer’s agent as a condition of being listed in an MLS.

Q: Can I Offer Compensation to a Buyer’s Agent?
Yes. You can continue to offer compensation to both sides in the real estate transaction. The precise language of the offer and the mechanics of how it is made will change.

Q: Do I Have To Offer Compensation to a Buyer’s Agent?
No. A listing broker can no longer require you to agree to make a blanket offer of compensation to a buyer’s agent.

Q: If I Don’t Offer Compensation to a Buyer’s Agent and an Unrepresented Buyer Wants to Buy My House, Who Will Represent the Buyer? Great question and conversations and negotiations like this will soon be real. If a buyer doesn’t want to have representation and doesn’t want to pay for representation, we expect that they would proceed by making an offer with the listing broker acting as a dual agent. It is important to remember that regardless of whether it is the same person at the brokerage speaking to the buyer and the seller or different people, agency relationships are made at the brokerage level, not the personal level.

Q: Can a Listing Agent Decline to Work with a Buyer who Doesn’t Have Representation?
Depending on the terms of the listing agreement between the seller and their brokerage, a listing agent will likely have several different options available to buyers without representation.

Q: Does Jackson Fuller Real Estate Offer Seller Representation?
Yes. We will continue to offer both seller and buyer representation.

A New Season For Real Estate Buyers & Sellers?

Questions & Answers For Home Buyers

Q: I Want Buyer Representation, Can I Still Have It?
Yes. If you want buyer representation, you’ll need to agree to it in writing in advance of seeing a home listed on the MLS. The agreement will specify how much the buyer’s agent will be compensated, the source of the compensation, and that the total compensation can’t be more than agreed.

Q: Can I Buy A House Without Representation As a Buyer?
This has been and continues to be an option. We help our buyer clients win at San Francisco real estate by questioning what they might not know they need to ask, bringing context and actionable insight to overwhelming amounts of information, and providing high quality data to enable our buyers to make life-changing decisions with confidence.

Q: Who Pays For Buyer Representation?
Historically, this has been paid for by the seller. If the settlement is approved, this practice will become optional. If a seller elects not to pay for a buyer’s representation, there are a variety of methods that can be agreed upon to compensate a buyer’s agent.

Q: How Does a Buyer Agent Know if a Seller is Offering Compensation?
Phone calls, text messages, and MLS data fields about seller concessions are the most likely methods, but how this information will be communicated in actual practice will most likely change and evolve over time. What we do know is that offers of compensation cannot be distributed by the MLS, nor can the settlement parties work to create an MLS-in-all-but-name workaround to the rule changes.

Q: Until This Proposed Settlement, Were Written Agreements Required for Buyer Representation?
No. This is new. While written buyer/broker representation agreements have existed, their use has been optional.

Q: Does Jackson Fuller Real Estate offer buyer representation?
Yes. We will continue to offer both seller and buyer representation.

What about San Francisco MLS Operators and Brokerages?

MLS Operators:
Homes in Northern California are generally listed in one of the MLS’ that are part of the Norcal Data Share Alliance. The Norcal Data Share alliance includes MLS’ covered by the settlement and MLS’ that aren’t.

Based on industry experience, we expect changes to be made at all MLS in alignment with the requirements of association-owned MLS’ regardless of actual ownership.

Brokerages:
Vanguard Real Estate, Compass, Side Inc. dba under numerous brands**, Sotheby’s, and Coldwell Banker are currently San Francisco’s largest real estate brokerages by sales volume.

Side Inc. dba under numerous brands**, and Vanguard Real Estate, are not parties covered by the settlement as we understand it. Please refer to their leadership teams for information about their corporate response to the proposed settlement.

Compass announced a settlement agreement for about $59 million on March 22.

Keller Williams, Coldwell Banker, and Sotheby’s have already entered into a settlement agreement.

Berkshire Hathaway HomeServices does business in San Francisco and is not a party to the settlement.

Regardless of actual brokerage affiliation, supervision, and oversight obligations, the settlement provides coverage at the individual level for NAR members who are or have been independent contractors acting as sales agents and brokers.

** In the Bay Area, What Teams, and Brands Are Operated By Side Inc. using DBAs?
We are aware of the following, although this list is not definitive and may change at any time: Abacus Real Estate, Abode Real Estate, About Real Estate, Aethos Real Estate, Agent 4 Life, Aijia Realty, All City Homes, Arrive Real Estate, Artistree Real Estate, Ascend Real Estate, Atlasa, Aveline Realty, Bay Real Estate Group, Bevy Homes, Blueprint Real Estate, BLVD Real Estate, Boulevard Real Estate, Brava Real Estate, California 24, Canopy Realty, Clearstory Real Estate, Compound Realty, Ektra Real Estate, Exceptionally Cool Homes, Fifty Hills Real Estate, Focus Real Estate, Gather Homes, Harper Real Estate, Heath Real Estate, Hedge Real Estate Helm Real Estate, Hero Real Estate, Illuminate Properties, Indigo Real Estate, Inspire Real Estate, Invest SLO, JetSet Homes, Journey Real Estate, Kinetic Real Estate, Kinoko, Kismet Real Estate, Legacy Real Estate, Level 5 Real Estate, Major League Properties, March Properties, Marin’s Finest, Medallion Real Estate Group, Meraki Real Estate, Mirror Real Estate, Momentum Realty, Mosaik Real Estate, Mpire Luxe Real Estate, Navigate Realty, Nova Real Estate, Olani Properties, Outpost Real Estate, Own Marin, Own Real Estate, Pacific Edge, Park46 Real Estate, Perch Real Estate, Pointe Real Estate, Premier California Properties, Probity Real Estate, Real Estate 38, Red Bow Real Estate, Red Door Real Estate, Redefine Real Estate, Refined Real Estate, Reveal Real Estate, Rivet Real Estate, Sage Real Estate, Sapphire Properties, Score Real Estate, Sela Homes, Side Inc., Sky Heights Real Estate, Solution Real Estate, Sterling Homes, Surge Real Estate, Symmetry Real Estate, Tenacity Real Estate, The Front Steps, The Keystone Team, Touchstone Real Estate, Tribe Realty, Trust Real Estate, Union Real Estate, Upward Realty, Vantage Realty, Verano Real Estate, Veritas Homes, VFlight Real Estate, Vivid Realty, Vivre Real Estate, Willowmar Real Estate, Zen Realty.