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Real estate brokers focus on value amid commission lawsuit unease

Buyer-broker agreements and tons of agent training are key amid commission lawsuits

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:

  1. 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.
  2. 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.
  3. Cost Management: About 10% of brokerages in the survey are looking into reducing overhead costs, possibly by consolidating offices or cutting certain expenses.
  4. 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.
  5. 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.
  6. 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.
  7. 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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