Top 7 Facts (vs Fiction) Commission Sharing Settlement

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April Fools Day calls for some FACTING! It's time to debunk some myths surrounding the NAR Commission lawsuit settlement. Let's clarify the facts and dispel the misinformation:

Fiction 1: The settlement forces real estate brokers to reduce their compensation.

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Facts: The settlement doesn't impose any limits on what Realtors can charge or the services they offer. Realtor fees have always been negotiable, reflecting the industry's competitive nature. Sellers have diverse options, and fees are determined through negotiation.

Fiction 2: The settlement will prohibit sellers from paying a commission to a buyer’s agent.

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Fact: Sellers retain the discretion to pay a commission to a buyer’s agent. It's crucial for successful property sales. Incentivizing buyer's agents ensures optimal exposure and selling opportunities for sellers.

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The Northwest MLS in the Seattle area has dealt with this since 2019 and, as such, has demonstrated that such changes have minimal effects on the market. In fact, it's largely business as usual. This is because the cooperative compensation model works!

Fiction 3: The settlement will relieve sellers of any financial burden of buyer agent fees.

Fact: Sellers may choose not to pay buyer agent compensation, but it doesn’t absolve them of costs. Buyers may request concessions or include contingencies for compensation, affecting overall transaction economics.

Fiction 4: The settlement reduces the total cost of transaction services.

Fact: Shifting the burden of agent compensation doesn't necessarily lower overall transaction costs. Realtor services are essential and should be compensated. Sharing costs between parties doesn't equate to reduced transaction expenses.

Fiction 5: The settlement will lower real estate prices and make homeownership affordable.

Fact: Real estate values are determined by market fundamentals, not Realtor commissions. Even if commissions decrease, it minimally impacts home affordability. Rising home prices stem from market dynamics, not commission structures.

Fiction 6: The settlement benefits buyers by allowing fee negotiation.

Fact: Buyer representation is traditionally covered by sellers, which benefits buyers, allowing them to finance fees over time. VA loans expressly prohibit buyer-paid commissions, raising questions about buyer benefits.

Fiction 7: The settlement results in significant restitution to harmed consumers.

Fact:

1. Size of the Settlement Fund: The NAR Commission lawsuit settlement has established a fund totaling $418 million. This substantial sum aims to address concerns raised regarding Realtor commission practices.

2. Number of Eligible Consumers:Approximately 21 million Americans are part of the "settlement class," comprising individuals who sold homes within the past four years. This extensive group reflects the widespread nature of real estate transactions and their potential impact on consumers.

3. Projected Payout Per Seller: After deducting attorneys' fees and accounting for the large number of eligible consumers, the projected payout per seller could be as low as $13. This amount underscores the challenge of distributing the settlement funds equitably among a vast number of claimants.

4. As we navigate discussions about the NAR Commission lawsuit settlement, let's prioritize understanding over misconceptions. It's crucial to recognize the complexities of real estate transactions and the roles of Realtors in serving buyers and sellers.

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