Ever wonder how your buyer’s agent makes a living? After all, as they’ve consistently emphasized, they’re not charging you a commission to find and buy a home.
Truth is, they get paid alright … just not by the homebuyer. The seller is responsible for paying both agents — that is, the one who sells their home and the one who helps you buy it.
That could change soon, thanks to two class action lawsuits targeting buyer commissions and how some of the major players in real estate advertise agent fees.
According to RealTrends.com, Anywhere Real Estate, the parent company of real estate brokerages Coldwell Banker Realty, Corcoran and Sotheby’s International Realty, recently reached a settlement worth $83.5 million. Another brokerage involved in the lawsuits, RE/Max, reached a $55 million settlement earlier this year.
The controversy over commissions has been brewing over the past few years, fueled by speculation around how much a real estate agent is worth and what they do to earn that fee.
As it stands, the home seller pays a commission of the sales price, typically 6%, which gets split between their agent and the buyer’s agent. This information is normally excluded from home listing sites (though some brokerages, like Redfin, do disclose it).
Because of this, many buyer’s agents advertise their services as “free” — in other words, they’re not charging their client a commission because they’re getting paid by the seller. But here’s the rub: According to the plaintiffs in the class action lawsuits, this practice of “commission sharing” inflates homebuying costs for everyone.
The defendants in the cases, which include the National Association of Realtors, Keller Williams and HomeServices of America, contend that the practice helps consumers. If you don’t have to pay an agent commission as a homebuyer, you’ll have more cash to spend on a down payment or the home itself. For sellers, the groups say, this increases the pool of potential buyers.
In any case, Anywhere Real Estate decided to settle, and agreed to make sweeping changes to the way its brokerages present fees to customers. Those changes include:
- Anywhere-owned brokerages and their affiliated agents cannot claim they offer free buyer’s agent services
- The commission to be shared with the buyer’s agent has to be included in each active listing
- Agents can’t sort listings by the amount of commission they’ll make unless their client requests it
The agreement is set to receive preliminary court approval by next month, with final approval coming sometime next year. Other defendants, like NAR and Keller Williams, have yet to reach a settlement. Taken together, the outcome of these trials could radically change the way real estate brokerages do business.
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