Propmodo Daily

By Franco Faraudo · Feb. 19, 2024

Greetings!

Buyer lawsuits over real estate commission structures are forcing multiple listing services (MLSs) to explore new strategies. One proposed solution is to permit sellers' agents to specify any amount, including $0, for buyer's agents on their listings. But the Department of Justice has issued a new statement, rejecting the proposed fix and further complicating efforts to resolve the issue. We’ll talk about this in today’s daily.

Also, this week, Propmodo Technology is exploring Asset & Investment Management, including the surprisingly difficult task of organizing real estate data and a look at how Berkadia is using AI.

Let’s go!

DOJ Throws Wrench into Real Estate Commission Settlement

Just when the residential real estate industry thought they could turn the page on at least one of the now almost one dozen commission splitting lawsuits, the Department of Justice has pooh-poohed the settlement terms. In a "statement of interest," the DOJ rejected the proposed settlement in the Nosalek case being heard in Massachusetts.

The settlement in question is actually a solution that has been pitched in a number of the commission lawsuits. It involves giving sellers' brokers the ability to enter in any commission amount for the buyer's agent, even $0. The thought was that this would remove listing services and, therefore, the real estate associations that run them from the liability of "price fixing."

But this change was not enough for the DOJ as it would "not create competition or reduce commissions," and "the modified rule still gives sellers and their listing brokers a role in setting compensation for buyers' brokers."

The problem, according to the DOJ, is that giving sellers' agents the ability to not list a commission price for buyers' agents still doesn't leave the commission up to the buyer. That is because of the pressure that can and is put on sellers' agents to keep up with industry norms. "As long as sellers can make buyer-broker commission offers, they will continue to offer' customary' commissions out of fear that buyer-brokers will direct buyers away from listings with lower commissions—a well-documented phenomenon known as steering," the filing said.

What the DOJ wants to see, rather than just the "cosmetic" change that has been "proposed, is a complete rethinking of how buyer commissions are negotiated. "Instead, the parties could propose an injunction that would prohibit sellers from making commission offers to buyer-brokers at all. That injunction would promote competition by empowering buyers to negotiate directly with their own brokers," the statement suggested.

The DOJ's opinion on the matter might be even more important than the outcome of the lawsuits being fought in court. The National Association of Realtors has suggested that all of these cases be consolidated in order to reduce the chance of conflicting rulings and reduce the burden of defending against them. There have been reports that NAR's legal defense funds are running out, which would leave each individual association to fight its own battle and greatly undermine the need for them to be part of a national association at all.

It's clear that ending the legal disputes over residential real estate commissions will demand a substantial transformation of how MLSs are run, not just minor tweaks.

Insider Insights

More News

Propmodo Technology: Asset & Investment Management

Overheard

Editor’s Picks

Are You Enjoying This Newsletter?

Propmodo Daily is written and edited by Franco Faraudo with contributions from readers like you and the Propmodo team.

📧 Forward it to a friend and suggest they check it out.

🔗 Share a link to this post on social media.

🗣 Have ideas for future topics (or just want to say hello)? Share your feedback and tips at [email protected] or connect with us on X through @propmodo.

✅ Not subscribed yet? Sign up for this newsletter here.

📫️ Please add our newsletter email, [email protected], to your contacts to make sure you don’t miss any updates.

Explore Propmodo

• Read exclusive articles about a variety of topics, including Real Estate, Workplace, Buildings, and Development.

• Browse our collection of interactive Propmodo Research e-books.

• Sign up for upcoming Propmodo Live Webinars or watch past Propmodo Live videos on-demand.

• Dive into Propmodo Technology articles, podcasts, and short videos about the future of commercial real estate.

Enjoy reading about trends and innovation in commercial real estate? Subscribe to Propmodo.com for unrestricted access to reliable, data-driven journalism and exclusive insights available only to subscribers.

Interested in sponsoring this newsletter? Contact us here