In 2013, shortly after the new loan officer compensation guidelines were imposed, we had a transaction where the buyer was short $700 to close because he spent his cash on a washer and dryer.
So, wanting to close on time still and wanting to impress the agents, I said… “No problem, just take the $700 from my commission.”
AND – the wholesale lender said: “No Can Do!”
New compensation rules imposed by the CFPB said that I was not allowed to make LESS money on that transaction. I had to make my pre-agreed level of compensation on every transaction – no matter what.
So, thanks to some incredibly stupid and short-sighted regulations imposed by naïve regulators who had never been in business for themselves, everyone (buyers, sellers, agents, escrow, and JVM) lost, as closing was delayed and we all had to spend time restructuring the transaction.
The regulators of course felt no pain at all.
Reason #27,842 why I disdain excessive government regulations; they invariably end up making everyone worse off while regulators and politicians rarely understand or face the consequences of their regulations.
Fast forward to the NAR lawsuit and the Department of Justice.
Commission Offers Drive American Industry
Without commission incentives, automotive, insurance, financial service, big-ticket retail item, pharmaceutical, non-QM loan, medical device, and software sales would all languish.
Those fields rely on commission sales, and consumers rely on those salespeople for information.
In short, commission offers and commission sales are the fuel that drives much of American industry.
But, what if the Department of Justice (DOJ) told those industries that they are no longer allowed to offer commissions?
Everyone would of course be irate because it would be a blatant First Amendment violation and a restraint of trade.
But, the DOJ is telling home-sellers precisely that.
This is a point the National Real Estate Post (NREP) recently made in this short video: MLS PIN vs. DOJ: The Battle for Real Estate Commissions.
The MLS PIN vs. DOJ lawsuit is somewhat old news now, but I love the points made in the video.
Inman and HousingWire both covered this back in June, but their articles are behind paywalls, and the video above provides a great summary.
TLDR: MLS PIN is telling listing agents and sellers that they can offer commissions to buyers’ agents on the MLS. The DOJ, however, is calling for “an injunction that would prohibit sellers from making commission offers to buyer brokers at all.”
I understand the DOJ’s and the plaintiffs’ contentions in the suits against NAR, in that NAR cannot require sellers to offer commissions when they list on the MLS platform.
But, I cannot begin to understand why sellers should not be allowed to offer commissions if they want to.
Homebuilder Offers 8% Commissions
In this short video, 8% Commission Bombshell: NAR, Are You Listening?, the NREP tells us that homebuilder D.R. Horton is now offering 8% commissions to Florida agents who bring them qualified buyers.
The reason is obvious. Florida is slowing faster than other states on the real estate front (it’s no longer a seller’s market), so builders are offering extra incentives to move their homes.
Did the Seller’s Market Drive the NAR Lawsuit?
So, that makes me wonder if the entire NAR lawsuit was driven by the fact that we have been in a seller’s market for so long – in which inventory was getting quickly snapped up.
If every market turns into a buyer’s market where inventory is sitting, will EVERY seller want to start publicly offering commissions on the MLS?
The answer is likely yes, and the NREP guys speculate that commissions will actually end up increasing.
Needless to say, I am pro-commission and anti-regulation, so this is just me rooting for agents again.
More importantly though, I would love to get feedback from agents in the trenches (95% of my readers) regarding what they’re seeing and what their thoughts are.
If I get enough interesting comments, I will publish them in a future blog.
