Recently, the real estate industry has been buzzing with discussions and legal actions surrounding traditional commission structures. Today, we delve into the ongoing lawsuits that challenge the established norms and explore the potential shifts in how real estate transactions might unfold.

 

The Traditional Commission Setup:

Traditionally, Realtors are compensated through commissions, a negotiable percentage typically ranging from five to six percent, which is often split between the buying and selling brokerages. Sellers agree to pay this commission when listing a property, and the listing agent specifies the compensation for the buyer’s agent in the Multiple Listing Service (MLS). In Nashville, Realtracs MLS publishes the offered buyer-side commissions publically. 

 

The Lawsuits:

Recent lawsuits allege collusion by major players, including the National Association of Realtors® and large brokerages, claiming violations of the Sherman Antitrust Act. The argument is that this traditional commission structure limits competition and raises seller costs.

 

Potential Changes on the Horizon:

While these lawsuits are under appeal, potential changes in the residential real estate landscape are being considered. One possible shift is a move towards a setup seen in commercial real estate, where sellers cover their agent’s fees, and buyers compensate their own agents.

 

Implications and Concerns:

The goal of reducing costs for sellers may be achieved, but concerns arise about increased expenses for buyers. This potential shift could lead to scenarios where buyers might struggle to afford their own representation.

 

Possible Outcomes:

Various scenarios might unfold, such as on-contract negotiations for the seller to pay all commissions, buyers rolling costs into loans, or buyers directly paying for representation. The impacts on the dynamics between buyers, sellers, and agents remain to be seen, and who pays who could end up being different in every deal. As market conditions change, deal structures could also change. One worry is that some buyers may ultimately decide to proceed as unrepresented to save money which could cause a spike in instances of Dual Agency whereby the listing agent represents both sides of a deal. Dual Agency is currently somewhat frowned upon in the industry as it is a leading cause of lawsuits. 

 

Conclusion:

As these legal battles continue and potential changes loom, the real estate industry is at a crossroads. Though we find it improbable that significant changes will occur imminently, the implications for buyers, sellers, and agents are uncertain. The evolving landscape invites us to stay vigilant and see how these developments shape the future of real estate transactions in Nashville and beyond. Rest assured that we are tracking these matters diligently.