Key Takeaways:
– The first class action commission lawsuit is going to trial in Kansas City, Missouri.
– Anywhere and RE/MAX have settled in the case, but the settlements have not been finalized.
– The National Association of Realtors, Keller Williams, and Berkshire Hathaway are still fighting the allegations.
– Real estate brokers are preparing for potential challenges by focusing on boosting their value proposition, listings, and training.
– Agents need to articulate their value proposition, especially when representing buyers.
– Some brokerages are implementing or emphasizing buyer representation agreements to ensure clarity in commission structures and protect agents.
– Some brokerages are looking into reducing overhead costs, possibly by consolidating offices or cutting expenses.
– Some brokerages are taking a cautious approach and waiting to see the outcomes of the lawsuits before making significant changes.
– Some brokerages are shifting focus towards listings or controlling the listing side of the transaction.
– Some brokerages are considering the use of technology, like generative AI, to change the way they operate.
– Some brokerages are restructuring commissions, including shifting commission liabilities or offering different commission models.
– The industry is taking a multifaceted approach to potential legal challenges by focusing on education, clear documentation, cost management, and emphasizing agent value proposition.
HousingWire:
Today, the first class action commission lawsuit goes to trial in Kansas City, Missouri. While two of the defendants — Anywhere and RE/MAX — have settled in the case, those settlements have not been finalized. The National Association of Realtors, Keller Williams, and Berkshire Hathaway are still going to court to fight the allegations.
Regardless of the outcome, real estate brokers are doing all they can to prepare their brokerages and their agents for more transparency, education on the value real estate agents bring to the transaction, and more, according to the 2023 Q4 BrokerPulse survey, a forward-looking housing market sentiment survey by HousingWire.
When asked how they were preparing for a worst-case scenario, such as a potential 30% loss of buy-side commissions, per a report done by Keefe, Bruyette & Woods, and an uncoupling of cooperation and compensation, brokers in the study say they are focusing on boosting their value proposition, listings and training. Here’s what they had to say:
- Value Proposition: There’s a recurring theme of agents needing to articulate their value proposition, especially when it comes to representing buyers. Some 40% of respondents say they are focusing on educating and training their agents. This includes understanding the value they provide, how to articulate this value to clients, and how to use buyer-broker agreements.
- Buyer Representation Agreements: A significant number of responses, 20%, mentioned the implementation or emphasis on buyer representation agreements to ensure clarity in commission structures and protect agents. Ensuring all fiduciary relationships are in writing and that all parties understand their rights regarding commissions was also mentioned.
- Cost Management: About 10% of brokerages in the survey are looking into reducing overhead costs, possibly by consolidating offices or cutting certain expenses.
- Wait and See Approach: Some 5% of brokerages are taking a cautious approach, waiting to see the outcomes of the lawsuits before making significant changes. While some believe that the day-to-day operations won’t be significantly affected, they acknowledge that there will be changes in how they interact with other brokers and how commissions are handled.
- Emphasis on Listings: Another 5% indicated a shift in focus towards listings or controlling the listing side of the transaction. Some brokerages express confidence in their ability to adapt to whatever changes come their way, emphasizing the importance of resilience and flexibility in the industry.
- Technological and Operational Adjustments: While seemingly unrelated, about 2.5% of brokers surveyed mentioned the potential use of technology, like generative AI, in changing the way brokerages operate or the services they offer.
- Restructuring Commissions: About 1% of brokerage respondents are considering or have already implemented changes to how commissions are structured, including shifting commission liabilities or offering different commission models.
The real estate industry seems to be taking a multifaceted approach to potential legal challenges related to commission structures. Brokerages are focusing on education, clear documentation, cost management, and emphasizing the value proposition of their agents
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Property Chomp’s Take:
In recent news, the real estate industry is facing a significant legal challenge with the first class action commission lawsuit going to trial in Kansas City, Missouri. While some defendants have reached settlements, the National Association of Realtors, Keller Williams, and Berkshire Hathaway are still fighting the allegations. Regardless of the outcome, real estate brokers are taking proactive measures to prepare for potential changes in commission structures and cooperation.
According to the 2023 Q4 BrokerPulse survey conducted by HousingWire, brokers are focusing on several key areas to adapt to a worst-case scenario. One of the main strategies is to enhance their value proposition. Brokers recognize the importance of educating and training their agents to articulate their value, especially when representing buyers. This includes understanding the value they provide, effectively communicating it to clients, and utilizing buyer-broker agreements.
Buyer representation agreements are also being emphasized by brokerages. These agreements ensure clarity in commission structures and protect agents’ rights. By documenting fiduciary relationships and ensuring all parties understand their rights regarding commissions, brokerages can maintain transparency and prevent potential disputes.
Cost management is another area of focus, with some brokerages exploring ways to reduce overhead expenses. This may involve consolidating offices or cutting certain expenses to maintain profitability in the face of potential commission changes.
Interestingly, a small percentage of brokerages are taking a cautious approach, waiting to see the outcomes of the lawsuits before making significant changes. While they anticipate some adjustments in how they interact with other brokers and handle commissions, they believe the day-to-day operations won’t be significantly affected.
Another approach that some brokerages are taking is shifting their focus towards listings or controlling the listing side of transactions. They believe that by emphasizing their ability to adapt and being resilient and flexible, they can navigate any changes that come their way.
In addition, a few brokerages mentioned the potential use of technology, such as generative AI, to transform their operational processes and services. While this may seem unrelated to commission structures, it highlights the industry’s willingness to explore innovative solutions in response to challenges.
Finally, a small percentage of brokerage respondents are considering or have already implemented changes to how commissions are structured. This may involve shifting commission liabilities or offering different commission models to adapt to potential changes in the industry.
Overall, the real estate industry is approaching potential legal challenges related to commission structures with a multifaceted approach. Brokerages are focusing on education, clear documentation, cost management, and emphasizing the value proposition of their agents. By taking these proactive measures, they aim to navigate potential changes and continue providing quality services to their clients.
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