Brokerages would have to restructure, agents and MLSs reconceptualize their roles if lawsuits force changes in compensation practices.

Since the early 2000s, the United States Department of Justice has investigated and challenged the NAR rules and practices governing commission sharing on multiple listings services alleging they violate the Sherman Antitrust Act that bans businesses from colluding or merging to form a monopoly. It’s becoming increasingly apparent that the DOJ’s ultimate goal is to force buyers to pay their own commissions.  

How would the real estate industry change if buyers had to pay a commission to the agents representing them?  

Currently, no one at the DOJ or NAR wants to make the MLS go away. The havoc that would wreak would be catastrophic.  

My concern, however, is unintended consequences. The primary purpose of the MLS since its inception has been to share listing data and the amount of commission the seller or listing agent is willing to pay to the buyer’s agent. If you force buyers to pay their own commissions, then what is the purpose of the MLS? With shared compensation ending, how is the MLS any different than a portal?  

Over the last few years, MLSs have been positioning themselves as the ultimate data source, not just platforms for offering shared compensation.  

Even without commission-sharing, however, the MLS is still invaluable to both buyer and seller agents. On the listing side, maximum exposure to the marketplace through the MLS helps the listing agent to quickly reach all those buyers’ agents who may have a buyer for the property while also helping the listing agent fulfill their fiduciary duty.  

On the buyer’s agent side, the MLS system makes it easy for them to provide their buyers with access to the maximum number of listings that match their buyer’s search criteria.  

Portals like Zillow and Realtor.com are at risk in this scenario because both companies are expanding based upon a referral-fee based model dependent upon shared compensation. An end to shared compensation would mean both companies would have to do a major pivot to find other revenue resources to replace their current model. 

What Would Happen to Dual Agency?  

It’s highly likely that agency rules may also have to be rewritten or legislated to accommodate the end of shared compensation. Theoretically, the shift to ending shared compensation should solve the dual agency issue. The problem is that the “agent” is the brokerage, not an individual Realtor.  

Currently, there are eight states where dual agency is not allowed: Alaska, Colorado, Florida, Kansas, Maryland, Texas, Wyoming and Vermont. 

To illustrate why dual agency would most likely remain an issue even if shared compensation went away, if a large brokerage has 10,000 agents in a major metropolitan area, none of those 10,000 agents could represent a buyer on the buyer’s side of a transaction involving another agent from the same brokerage. Clearly, this is not in the best interest of the seller who wants and needs that maximum exposure to obtain the best possible price for their property. Furthermore, it may even be a restraint of trade.  

One potential workaround for brokerages that represent both buyers and sellers would be to create a separate listing and a buyer company in the areas they serve, both operating under two different corporate entities under the same parent company. Many agent teams already bifurcate their business this way as do some of the brokerages operating under an employment model.  

How Should Agents Prepare? 

Instead of increasing competition among listing agents, the real competition would occur among buyer’s agents. Up until the time that this change takes place, buyer’s agents don’t have to worry about negotiating commissions because the listing agent does the work for them.  

This shift could be a tremendous boon to buyers who would now be able to experience how effective their buyer’s agent would be negotiating on their behalf. Here’s a script that I suspect many top buyer’s agents will rapidly adopt: “If a buyer’s agent can’t negotiate a full commission on his or her own behalf, how effective do you think that agent would be in negotiating the best possible price and terms for the property you want to purchase?” 

Whether representing the buyer or the seller, the best agents have no trouble persuading their clients to list with them at a full commission. It’s those who are unable to articulate their value who cave on the amount of commission they charge.  

Given how slowly change takes place in the real estate industry, any change in compensation may be years off. On the other hand, if the DOJ were to force the end of the shared compensation, the industry will have to scramble to shift to an entirely new environment.  

For agents, the best course of action is to become trained on how to become an exclusive buyer’s agent. In addition, every brokerage, MLS, and association needs a contingency plan to address this shift as well as to lobby for the necessary changes in the law to accommodate this new business environment were buyers pay their own commissions.  

Bernice Ross is a nationally syndicated columnist, author, trainer and speaker on real estate topics. She can be reached at bernice@realestatecoach.com.