Realtor Commissions Lawsuit

November 16, 2023, by Susan Kadilak

You may have heard in the news recently that the National Association of Realtors lost a “commissions lawsuit,” known as the Sitzer-Burnett Trial. At the heart of the trial is the question of how buyer agents should be paid, and whether or not sellers should pay an agent who is working for the buyer.

via Reuters

Historically, home sellers have paid other agents to “bring the buyer” and work with them to bring the sale to a close, however, that other agent has not always represented the buyer.  

When I started in the business, working with a home buyer meant that I was showing them homes, writing offers, and facilitating the transaction –  but I was always acting as a sub-agent of the seller. This means that even though I was working directly with a home buyer, I legally had to represent the interests of all the sellers of the homes I was showing and work with the listing agent in the seller's best interest; against the buyer.

As you can imagine, buyers did not like this. There was a wave of consumer activism that sought to change the agent’s role. They said buyers should have representation. Spreading fear of vicarious liability (sellers being responsible for the actions of the other agent they did not hire- even though there was no actual case around this) added gas to the movement and led to a change in the role of the selling agent.

When our agency laws changed in Massachusetts to include buyer representation, the role of the agent who worked with the buyer changed, but the compensation structure did not. Instead of offering compensation to sub-agents of the seller, compensation was offered to the buyer’s agents and/or facilitators (non-agents).

Although NAR lost this case, the appeals process can take years. Additionally, even though this case does not technically affect Massachusetts, there are copycat lawsuits happening everywhere and consumers should expect to see policy changes as they navigate dipping their toe into the real estate market.

Some changes you may see are:

• More disclosures, options, and explanations around how compensation works.

• Just as sellers sign a listing agreement with their agent, home buyers should expect that the practice of signing a buyer agency agreement will become more common. I have always practiced this way because I feel it makes our role clear to the consumer, but many agents do not.

• If there is no offer of compensation from the seller or listing agent, home buyers may want to negotiate their agent's compensation at the offer stage and there are various ways to do this. This is an important discussion you should have with your agent before looking at homes.

• Home sellers should discuss the pros and cons of offering cooperating compensation with their listing agent before deciding on a strategy that works best for their situation.

• One of the major concerns among consumer advocates is that this change may create an environment where having representation during one of the largest purchases of your life becomes a privilege only for those who can afford it. For that reason, expect to see advocacy at the national level to give buyers the right to finance costs associated with representation.

While we don’t know exactly what changes will affect consumers here in Massachusetts yet, we will be watching to continue to inform you as things develop. What we do know is that while this is all happening in the background, people still need to buy and sell homes. We will still be here to guide you through the entire process!