Truth about proposed National Association of REALTORS settlement
As a child, I moved 19 times before I graduated high school. A house to call home was a concept that I didn’t understand until the ninth grade when I began spending time in the home of my best friend. A small, green frame house on a subdivided street in a busy area of Garland, Texas. It was a dream to me … a tattoo of stability, consistency and belonging upon my heart.
Housing is a basic human right, and homeownership is a dream for many. That is why I labor to build an environment where people can buy, sell or lease real property. It is also why I am troubled about the skewed reporting around the proposed National Association of REALTORS® settlement regarding brokerage commissions.
Let me offer the truth from four commonly believed fictions:
“This settlement means commissions are now negotiable.” Commissions have always been negotiable. Historically, negotiation between sellers and brokers has been the most prominent area in which negotiation has occurred. In the 1990s, members of the National Association of REALTORS® agreed with governmental entities, consumer groups and the public and adopted more vigorous cooperative compensation practices, further enhancing those negotiations. This leveled the playing field for both sides of a transaction and allowed millions of homebuyers to be represented. There is something very good and very right about that.
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“This settlement means that home prices will come down.” Nothing in this settlement addresses home prices. The market dictates that. Inventory is the main driver of housing prices, and America faces a housing shortage. Inventory is roughly 70% of what it was pre-pandemic. That trend started after the housing collapse of 2008 and continues to grow. Labor and supply shortages, coupled with inflation, have escalated the shortage. Supply and demand dictate that prices will remain higher as long as there is a short supply.
“This settlement means that brokers can no longer cooperate.” Nothing is further from the truth. Brokers, by and large, understand that cooperation has tremendous value. Third-party websites like Realtor.com and Zillow have invested billions in building business models based on broker cooperation. The settlement only affects the display of commissions in the multiple listing service (MLS), which is private. This settlement protects sellers’ ability to enter into agreements with brokers based on cooperation. That is good for the dream of owning a home in America.
“This settlement means it will cost less to sell a property.” Perhaps. It is possible that sellers will choose to opt out of a cooperative compensation agreement with their brokers. That choice has always existed. When cooperative compensation doesn’t exist, the seller’s closing costs could be lower, while the buyer’s closing costs could be higher. Properties likewise will have a much smaller audience. With fewer buyers able to raise money to close, properties will take longer to sell. Additionally, veterans are prohibited from paying commissions when using a VA loan. All in all, like today, sellers’ potential costs are higher when cooperation is excluded.
So, what does the settlement mean? It means that more than 1 million REALTORS® can focus on serving people instead of defending lawsuits. This means that new information sharing will be generated. It means the memorialization of a buyer-broker agreement will become normalized. It means the kid today, riding his or her bicycle in the inner cities, suburban streets and dirt roads of our great country, can still dream of one day having a place to call home.
Bryan “Hutch” Hutchinson is the CEO of the Oklahoma Association of REALTORS®, the statewide professional organization representing the approximately 14,000 REALTORS® across Oklahoma.
