July 14th 2023

What does the NAR Class Action Lawsuit mean for Real Estate?

11/6/23 Update: 

The verdict is in and it's a BIG ONE. Check out our blog detailing the fallout and what you can do to prepare. Click Here to view, "NAR Lawsuit Verdict: What Do Real Estate Agents Do Now?"

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Earlier this year, the Moehrl class action lawsuit was filed against the National Association of Realtors as well as some of the top brokers in the industry. In this episode, Chris and Garry break down what this lawsuit means for the real estate industry, how agents could be affected, and what steps agents can take to prepare for any potential ruling.

NAR Class Action Lawsuit Impact: A Shift in Real Estate

The NAR Class Action Lawsuit is a significant development that's reshaping the landscape of real estate. This class-action lawsuit, and others like it, has major implications for agents, brokers, and buyers alike; thus changing the face of real estate.

In this blog post, we delve into the specifics of the antitrust litigation news NAR received and explore how it could potentially alter buyer representation agreements and commission structures. We also discuss its effect on commercial real estate practices and barriers to entry in the industry.

Moreover, we'll examine how this shift might impact listing agents' reputation management strategies amidst changing dynamics. Lastly, we will address marketing tactics for commanding higher commissions effectively in light of these changes.

Understanding the NAR Class Action Lawsuit Impact is crucial for every professional seeking to navigate through these turbulent times successfully. Stay tuned as we unpack this complex issue together.

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The NAR Class Action Lawsuit

Have you heard about the NAR lawsuit? It's causing quite a stir. 

The National Association of Realtors (NAR) and several prominent real estate brokerages are facing significant legal action.

Basically, it's challenging how buyers' agents get paid. Critics say that if listing brokers stop paying buyer brokers, it could shake up the industry big time.

Potential Changes in Buyers Agents Compensation

If successful, this suit might mean buyers have to pay their agents directly instead of through seller commissions. Talk about a game-changer. We'll dig into the impact later, but first, let's cover some basics...

Impact on Commercial Real Estate

The NAR class action lawsuit could potentially shake up the commercial real estate sector.

This is an industry where charging a fee for services has long been standard practice.

Current Practices in Commercial Real Estate Fees

In most cases, it's the seller who pays both their agent and the buyer's agent commissions.

This system makes sure buyers don't have to be concerned about extra expenses when purchasing real estate.

Possible Strategies for Brokers

If this lawsuit results in changes to how agents are compensated, brokers will need to adapt quickly.

A change like this will require careful communication with clients and potential customers alike - explaining why buyers are now being asked to pay what was traditionally covered by sellers can be tricky business.

To navigate these uncharted waters successfully, brokers should focus on delivering exceptional service, justifying any new charges or commission structures.

Barriers to Entry in the Real Estate Industry

The real estate industry presents a challenging path for those seeking big financial rewards.

First, aspiring individuals must navigate through the licensing requirements. Each state has its own set of educational hours that must be completed before even considering taking the exam. This process can be quite daunting. 

Additionally, one cannot overlook the costs involved. It's not just about paying for courses and exams; there are also brokerage fees and association dues to consider. All these expenses add up quickly.

Predicted Effects of New Law on Industry Entrants

Now, brace yourself for the consequences following the NAR class action lawsuit. Some experts believe it will make things even more difficult for newcomers.

Say farewell to commissions paid by sellers. This means less income for new agents who heavily rely on these payments.

Moreover, if you're a fresh face in this field, get ready to negotiate your commission with buyers. This requires upfront time investment from you.

As a result of increased financial risks and income uncertainties, we may witness fewer people entering this profession altogether. The days of traditional real estate sales teams could become a thing of the past.

To thrive in this ever-evolving landscape, individuals must be prepared to adapt and stay competitive at all times.

Effect on Listing Agents and Brokerages

The potential impact of the NAR Class Action Lawsuit could be huge for listing agents. As we say goodbye to buyer's broker commissions, it’s time to step up your marketing game.

Significance of Reputation & Trust According to NAR

NAR knows that trust is key in real estate transactions. Your reputation takes years to build, but it can be destroyed in a heartbeat.

Predicted Impact on Commission Structure

This new law might shake up commission structures big time. Brace yourself for more competition. To stay ahead, listing agents and brokers need to adapt and innovate like never before.

Marketing Your Listings Effectively Amidst Changing Dynamics

In the face of ever-changing real estate dynamics, marketing strategies are more crucial than ever. Don't get left in the dust.

Digital platforms provide an avenue for agents to reach a broader audience and command higher commissions without paying towards buyer's agent commission.

Benefits Of Online Marketing And Paid Advertising

The impact of online marketing in the modern digital world is immense. It's like having a megaphone for your listings.

With strategic use of SEO keywords and engaging content on your website or blog, you can attract potential buyers directly from search engines. Talk about cutting out the middleman.

You can also leverage it through Google AdWords or social media ads like Facebook Ads to drive targeted traffic to your listings. Get ready for a flood of interested buyers.

Make marketing the least of your worries with The Paperless Agent! As a Marketing Club member, you'll gain access to a comprehensive suite of resources, training, templates, and scripts that will empower you to project a polished and professional image in the real estate industry. Try it today for just $1. 

Tips For Commanding Higher Commissions

To ensure maximum return on investment (ROI), here are some tips to make those commissions soar:

  • Create compelling property descriptions that highlight unique features and selling points. Make those listings irresistible.

  • Leverage high-quality photos and videos showcasing the property. A picture is worth a thousand words, after all.

  • Promote testimonials from satisfied clients as social proof. Let your happy customers do the talking.

  • Last but not least, maintain regular communication with prospective buyers, providing them updates about new listings matching their preferences. Keep them in the loop.

Navigating these changing dynamics effectively will set you up for success in commanding higher commissions.

Moving forward, let's explore double ending deals - often seen as advantageous by brokers but potentially problematic when viewed under scrutiny.

The Double Ending Deals Dilemma

Double ending deals - a contentious topic in the real estate world.

This practice, where one agent represents both buyer and seller, can seem like an enticing prospect for brokers looking to maximize their commission earnings.

The Pitfalls of Double Ending Deals

However, it's not all sunshine and roses.

Double ending deals, as they're often called, come with significant drawbacks that you should be aware of.

  • Potential conflicts of interest are inherent when representing opposing sides in a transaction.

  • You may find yourself walking on thin ice trying to provide equal service to both parties.

  • If either party feels shortchanged or deceived during negotiations due to your dual role, this could lead down the slippery slope towards litigation issues later on.

In fact, some states have even moved towards banning double-ended deals altogether, citing ethical concerns around these very pitfalls.

So, what should you do?

As tempting as double-ending might appear from a financial standpoint, it's important we remember our responsibility is first and foremost providing value-added services while maintaining integrity.

In light of potential changes coming from recent NAR lawsuit implications, we need to consider if risking client trust and satisfaction is worth a few extra dollars?

Remember: reputation is everything in this industry. Don't let quick profits cloud long-term success strategies.

Conclusion

The NAR Class Action Lawsuit and its potential impact have sent shockwaves through the real estate industry. As we navigate through this shifting landscape, it is essential to understand the implications and prepare for the changes that lie ahead.

The lawsuit has the potential to reshape buyer representation agreements and commission structures, affecting agents, brokers, and buyers alike. Additionally, commercial real estate practices may undergo significant transformations as well. Barriers to entry in the industry may become more challenging, impacting newcomers seeking to establish themselves in the field.

In light of these changes, it is crucial for listing agents and brokerages to adapt their reputation management strategies and find innovative ways to market their listings effectively. Embracing digital platforms and online marketing can provide agents with a broader reach and the ability to command higher commissions. However, it is important to approach double-ending deals with caution, as potential conflicts of interest and ethical concerns may arise. As the industry continues to evolve, we must remain adaptable and committed to delivering exceptional service to our clients.

11 Comments

  1. Very good video. Gives one a lot to think about what changes need to be made in ones current real estate practice. Look forward to receiving future videos.

  2. I find the video regarding the potential Nar lawsuit banning buyer broker compensation from the liting agent had not addressed very well the problematic pitfalls to your agrguement. 1) With the buyer paying the buyer broker a commission, the cost of purchasing a home will increase for the buyer and many buyers do not wisdh to have increas costs or are unable to do so as their down payment will be affected in the purchase. 2) the seller will want to pay a lower commision since half of that fee will not going to the buyer broker. Yes, I understand that work has to be done to educate the seller what you are going to do to get them the highest amount for their property is hopefully the shortet time. However, they are very cost conscious as well in what the sellers cost will be and feel that since they are not paying a buyer broker, why should they pay the 6% to the listing broker who they expect would market the heck out of the property which they should being anyway and why pay that large fee. It sould like your focus should be on showing the value of the listing agent, wheich I agree is paramount, but sellesr are cheap, nevertheless. This is a problem with the pitfulls of dual agency that will have its' challenges. Always good to hear your videos, but with all videos, I do not feel both sides of the coin are represented efficiently. Thanks for you time gentlemen.

  3. They've been trying this for the past 3-5 years with different lawsuits against HUD and NAR. They want the buyer's commission to be put into the price just like a HUD or Auction property where the buyer pays the fee.

  4. My brokerage just discussed this on Tuesday of this past week and our MB said we may have only one year to implement changes if the case proceeds successfully for those filing it. Of course, one never knows how these things will pan out and I tend to agree other litigation will occur as a result of the class action suit decision. Thanks for sharing Gary/Chris!

  5. I love your video on the Class action law suite. Thank you both for taking the time to do this video.

  6. I want to thank you for explaining the lawsuit so clearly. You’ve demonstrated in your video how knowledgeable and professional you are! I learn something from you every time I log in. Keep up the GREAT work 😊

  7. Nobody is forcing sellers to hire a realtor. They have options at their disposal they are free to use. They can negotiate the commissions or choose to work with an agent that will. This lawsuit is nothing more than a group of people looking for a payout to go away.
    Think about it.... A seller generally move up to a more expensive house when they sell. If they don't split the commission and pay a buyers agent on the home they sell, sure they save some money, but it costs them more when they HAVE TO PAY their own buyers agent on the more expensive house in the future.
    Another issue is the buyers pool will drastically dry up because a high percentage of buyers will not be able to enter the market due to no money to pay for representation. The price of homes will fall because of this .
    It's just a legal hustle for a payoff to go away. The Al Sharptons of real estate are going to hurt the industry as a whole. I hope NAR has smart enough attorneys to get past this smoke screen.

  8. The structure commission has been working well for the past 100 years, sellers always want to keep more money out their equity, but wish to skip the ton of paperwork involved, specially designed to avoid any unforseen circumstance in the future. All this documentation is needed to avoid going to court in a legal dispute, where the the owner of the home would have to hire a lawyer and pay court fees and if found at fault, seller would have to return the buyers money and maybe slaped with a lawsuit for a potential fraud. If the listing agent and the Buyer's agent performed their fiduciary duty, they are legally entitle to their compensation. no one seldom questions the Job of the escrow and their fees. No one ever questions the job of the loan officer and their originating fees. Its always the commissions of the seller's and Buyer's agents that end up in the negotiating table; legislation have cut off "legs" that can "grow" if these agents are not propperly regulated. Commissions are not set on stone or fixed between agents, commissions are negotiable by the listing agent and includes the compensation for the buyer's agent. For auction, foreclosures, Short sales, tax sales, etc. the Buyer pays a buyers fee to compensate their buyer's agent. and most of the time it all depends on the kind of property up for sale in the market, whether a residential a 1 to 4 Units, Income units, buildings, commercial, retail, business opportunity and land = agriculture or other land use. A well structured agreements and commissions signed by both sellers and buyers and their agents, has been working WELL for the past and it will do it again and again in the future. Don't cave in to new ideas that benefit people without a license and don't want to perform the "work" involved, opening to lawsuits and ruining the Real Estate Market and livelihood of licensed sales agents.

  9. In a court of law the Judge decides how much is to be paid in commissions (ussualy 6%) using Real Estate agents on both sides of the transsaction, if the court puts precedence ahead of any other new idea of settlement for the sale of the property, who are this Class action suiters, with what base they stand to start bringing "new Ideas" into how much money Real Estate agents get paid. None sense, If I be the Judge, I would throw away a malicios and frivolous class action lawsuit of this kind.

  10. I remember asking when I was very young why the need for a middle man in home buying and selling made any sense. The best answer is navigating the contract. After that is is access to the MLS. After trying out being an agent for half a year I quickly realized that the buyer's agent is a huge rip off. Charging that much money because I have MLS access? With the internet you can find homes on your own. Let's be honest the only reason people need buyer's agents is because they purposefully have had access to info that buyers can't see. Now if you would rather spend money, than time, on looking for a home, be my guest, hire a buyers agent. But do we really need buyers agents in real estate? Now that you can find homes, and schedule showings all on your own? The most important thing in buying a home is probably the inspections. I think it's about time new technology renders the buyers agent obsolete.

  11. Question:
    Where are the 6 % commissions anymore?
    If the commission to the seller is less and the buyer "pays" the commission the amount remains the same.

    All the Services of a Realtor, keep in mind, are FREE and under strict and Professional Standards (which are continually updated) until the job is completed and closed.
    How many jobs do you know of that all the work, expenses, time, effort & responsibility is for NOTHING until the deal is closed and paid.

    In 30 years of Real Estate the one thing that is constant is CHANGE & regulation that stays with the current standards. Our industry is continually evolving for the good of all parties.
    The "news" is not new it's just a different manner to handle this one of thousands of parts of the Real Estate transaction.
    Thanks for your video and explanation.
    We are a flexible and forever changing part of an incredible career and lifestyle in Real Estate.

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