NAR capitulates on Class Action Lawsuits as RE industry undergoes seismic disruptions

[AJ Wong]

It's official. The National Association of Realtors know as NAR 'settled' the class action lawsuits over conspired commissions and essentially surrendered with far reaching impacts on the industry and real estate investors. In short, the agreement annihilates the current model of seller's compensating buyer's brokers.

Beginning this summer, buyer's broker commissions can no longer be advertised or essentially offered on the MLS and can be negotiated up front. Buyer's will need to sign a buyer's brokerage agreement for a particular property, length of time or scenario.

Realtors can compete on commissions, or even offer a flat fee transactional rate for service. 

I wrote about this weeks ago and the potential impacts it could have on real estate investors and financing. This settlement goes much further and faster than I (and probably anyone else) expected. 

At first glance it creates a lot of potential confusion for both buyers and sellers. Part of the net impact on brokers and buyers will depend on how the guidance from Fannie/Freddie and lender's plays out. Commissions can generally be a part of seller concessions but there are limits to the amount of contribution, particularly for investment properties (usually 2% of the sales price.) At a minimum it would reduce some of the consumers options and flexibility in transactional structure. 

High level...the average commission rate is going down, the quantity of brokers (and brokerages) are going to be reduced. Listing brokers effectively become dual agents be default and many investors or buyers (especially at the entry level) will effectively go unrepresented. There will be a rise of flat fee or for service brokerages and brick and mortar offices will become much less saturated. Specialty or niche services will expand as will niche mortgage products that encourage or enable buyer broker compensation. These are all initial impression assumptions that I will explore more in another post. 

The industry is seemingly caught very off guard by the massive failure of NAR to communicate the potential outcomes and timeline of the agreement to its members. They didn't even break the story.

How do you feel about this news? Does it help or hurt the investor?