Two of the nation’s largest real estate brokerage franchisors said they will no longer require their corporate-owned brokerages to be members of the National Association of Realtors. The changes are part of a multimillion-dollar settlement in two federal lawsuits that challenged the traditional model for paying agents who represent homebuyers.
Anywhere settled for $83.5 million, and RE/MAX announced it would pay $55 million into the settlement fund. Some have speculated that the proposed settlement could prompt real estate companies to leave NAR and change half of the real estate industry’s traditional compensation model.
In this model, people pay a commission to a real estate agent to sell their home, but that part of the compensation model is not at risk. At issue is the traditional practice of sharing that fee with the buyer’s agent.
Anywhere’s brands include Better Homes and Gardens Real Estate, Century 21, Coldwell Banker, Corcoran and Sotheby’s International Realty, which together command significant market share in Hawaii.
But some local real estate agents say their companies are unlikely to make any major changes in the short term, saying the settlement still requires court approval and, if approved, may not be approved until early next year. It is pointed out that it is highly sexual.
“I don’t expect anything to change anytime soon,” said Kalama Kim, 2023 president of Hawaii Realtors, a statewide organization, and president of Berkshire Hathaway HomeServices Hawaii. says. “And I don’t know if it’s going to change anything significantly in the future.
Contrary to some headlines, the Anywhere and RE/MAX settlement does not state that the companies’ brokerages and affiliates cannot become members of NAR.Instead, companies say they won’t. I need A company-owned brokerage firm, franchisee, or affiliated agency cannot become a member of NAR. You are also not required to follow NAR’s Code of Ethics or MLS Handbook.
“Every RE/MAX broker in the U.S. is free to decide whether NAR membership is the best fit for them and their agents, and we support either choice.” RE/MAX said Nick Bailey, President and CEO. told affiliates in a statement..
Redfin leaves the national association
Only Redfin has a nationwide presence. announced that they would be withdrawing from NAR. It was after that over the issue of fees. New York Times report It detailed allegations of sexual harassment within the National Trade Association, particularly by NAR President Kenny Purcell, who resigned two days after the Times published the article.
Although membership is not required, most brokers and agents in Hawaii are members of NAR, as well as the statewide Hawaii Realtors organization, Honolulu Association of Realtors, Maui Association of Realtors, and Kauai Board of Realtors. , and is a member of local organizations such as the Hawaii Island Realtors. . In return, the group provides continuing education to its members and lobbies on issues affecting the real estate industry.
“Brokers always had a choice. It was their choice whether or not to become members of NAR,” Kim said. Additionally, there are already companies and agents who have chosen not to pay dues to belong to real estate agent organizations. “One more part of it is the compensation between the seller and the broker, the buyer and the broker. That was always negotiable.”
Not all defendants in the two lawsuits settled. NAR, HomeServices of America and Keller Williams Realty were scheduled to make opening arguments this week in federal court in Kansas City, Missouri, in one of the lawsuits, known as Sitzer/Barnett.
“NAR fundamentally disagrees with how class action attorneys characterize our rules.” Katie Johnson says, the association’s chief legal officer and chief member experience officer. “NAR’s rules and local MLS broker marketplaces provide significant benefits to consumers and enable business competition to thrive.”
buyer agent fees
in The lawsuit centers on how agents who represent homebuyers are compensated.. Commissions are typically paid by the seller to the listing agent at the closing of the sale as a percentage of the sales price (usually 5% or 6%). The seller’s agent then shares a portion of that commission (usually half) with the buyer’s agent. Plaintiffs in the lawsuit argue that the seller should not have paid the buyer’s agent.
Chuck Garrett, president and principal broker of Corcoran Pacific Properties, which has offices on Kauai, Oahu, Maui, and the Big Island of Hawaii, said he believes the court will issue several points regarding buyer agent fees in the settlement. He points out that it has been addressed. Almost his NAR in action that took place two years ago. Sue Yannakorn, CEO and President of Anywhere, agrees. in a statement.
November 2021, NAR A news release has been issued This partly reinforces the idea that intermediary services are not free and should not give the impression that they are free to local market participants, especially regarding buyer agents.
Anywhere’s proposed settlement goes a step further by banning company-owned brokerages, such as Honolulu’s Coldwell Banker Realty, from claiming that their buyer agent services are free. Anywhere says it “recommends and encourages” franchisees to make the change. RE/MAX says It encourages its agents to be “honest and upfront about the cost of their services and the amount they expect to be paid.”
How agents are paid is not always made clear to homebuyers. Hawaii Realtors has a purchase agreement form for agents, but very few people use it.
“We talk to the seller, we call it a listing presentation, and we discuss everything with the seller, especially the value of what we’re offering,” Garrett says. “In our previous relationships with buyers, it was a relationship.”
Here’s what’s next for buyer agents
Both settlements make it clear that Anywhere and RE/MAX franchisees are encouraged to include buyer agent fees in their listings and make clear that fees are negotiable. I am.
Ryan McLaughlin, owner and principal broker of Anywhere franchisee Island Sotheby’s International Realty on Maui, said this is interpreted to mean there are no rules requiring the company to offer compensation. He said it was possible.
![Ryan McLaughlin's photo](https://www.hawaiibusiness.com/content/uploads/2023/10/n/n/ryan-maclaughlin-headshot.jpg)
Ryan McLaughlin, Owner and Principal Broker, Island Sotheby’s International Realty – Maui
“Smart sellers are going to encourage people from all walks of life in the real estate industry to come see their properties, and I’m going to offer compensation for that,” McLaughlin says. “I’m not saying we’re going to get rid of that. We’re just not saying we’re going to oblige sellers to pay commissions.
Scott Carville, owner and principal broker of Carville Sotheby’s International Realty in Kailua, said sellers have the option of not paying a buyer’s agent, but they can attract agents who bring in qualified buyers. In some cases, sellers may choose to pay higher fees.
![Scott Carville mugshot](https://www.hawaiibusiness.com/content/uploads/2023/10/t/i/scott-carvill-headshot.jpg)
Scott Carville, Owner and Principal Broker, Carville Sotheby’s International Realty – Kailua
He says his company’s practice has always been to offer commissions to outside buyer agents, but that policy isn’t followed by all sellers.
The proposed settlement also states that the companies’ technology would prevent agents from sorting properties by commission amount, preventing agents from showing buyer agents only those properties that pay the highest commissions. It has been pointed out. Garrett, his 2023 president of the Honolulu Association of Realtors’ HICentral Multiple Listing Service, says such searches are not possible on the MLS.
What Garrett sees as a result of the lawsuit is a greater focus on the buyer-agent relationship, which at this point may be based solely on a handshake.
“I think you’ll find that the presentation to buyers becomes richer, more important, and a bigger part of the process,” Garrett says. “They seem inevitable.”
![Kevin Yin headshot](https://www.hawaiibusiness.com/content/uploads/2023/10/a/e/kevin-inn-headshot.jpg)
Kevin Yin, President, Better Homes and Gardens Real Estate Advantage Realty – Honolulu
Kevin Yin, president of Better Homes and Gardens Real Estate Advantage Realty in Honolulu, said this is “an important step for us to step up and educate buyers about what process they are going through.” “It means being able to explain what is going on.” And explain why it’s important to have that representation. ”
A written agreement is recommended
Kim said he believes it is important to have a written contract between the buyer and the real estate agent, similar to the contract a company has with a seller.
“This clarifies the brokerage firm’s duty and fiduciary responsibility to its customers, so buyers know exactly what to do,” Kim says. “It increases the level of expectations for professionalism from real estate agents.”
Kim said 11 states have enacted laws requiring buyer agency agreements, noting that Washington state recently passed the law, which goes into effect Jan. 1. Hawaii real estate agents may consider supporting the passage of such legislation here if their members support it, Kim said.
Consumers could also benefit from this change.
“I think this settlement is good for the people,” McLaughlin said. “Thanks to technology, real estate is now open to the public, so we feel that everything should be as transparent as possible.”
Kim will be heading to Chicago this week for meetings at NAR, including the first meeting of NAR’s Culture Change Committee. Kim will serve as a member of the 75-member committee. It was formed after a report in the Times newspaper..