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Answering all those burning questions you didn’t know you had about home ownership.

Sharks, FSBOs & NAR Rule Changes

Picture of Jessica Dabkowski

Jessica Dabkowski

Helping you with all things homeownership!

I honestly wasn’t sure whether I would end up writing a follow up article about the proposed NAR rule changes – would people even want to read it? Most of you are homeowners, but not actively in the process of buying or selling.

But as I got out and interacted with people last week, I realized people are interested. They want to understand. They want to understand because the media (and the President?!?) has done an atrocious job of explaining. In some instances, the articles contain unapologetic misinformation. It actually really startled me.

My personal sentiments about the media coverage.

Last week, we discussed the evolution of the current commission structure in real estate. If you missed it, go have a quick scan before jumping into today’s article.

The Lawsuit

Here’s a quick summary of the lawsuit:

Sitzer-Burnett is a class-action lawsuit that was filed in Missouri federal court by a group of home sellers in the state against NAR and other defendants, including Anywhere, Berkshire Hathaway HomeServices, Keller Williams and RE/MAX. The plaintiffs claimed that real estate commission rates are too high, buyers’ representatives are paid too much, and NAR’s Code of Ethics and MLS Handbook, along with the corporate defendants’ practices, lead to inflated commission rates.

Breaking Down Sitzer-Burnett

Class Action Sharks

I would like to point out that most class-action attorneys work on spec – just like real estate agents. They take on a case in hopes of getting a huge pay day at the end of the road. Generally, the attorneys keep one-quarter to one-third of the settlement money. In some cases, it is the attorneys who find the case premise, identify a potential large settlement from a defendant with deep pockets and then go out and work backward to FIND THE PLAINTIFFS. (Yes, you read that right.). It is also not unheard of for the attorneys to identify where to file the case based on the most likely jurisdiction to give them a big win. That’s right, they cherry pick the case, the plaintiffs and the location to file.

To be clear, I don’t know how this particular case evolved. I just thought a little background on how these cases typically work might be helpful. At the end of the day, it is likely the attorneys will walk with well over $100m in compensation once the NAR settlement is factored in.

Of note, the jury selection process ejected anyone who had sold a home in Missouri after 2014. Those individuals were a member of the class and had an automatic conflict of interest. This requirement also means anyone who might actually have first-hand knowledge of the experience was not allowed to serve. There’s a strange sort of injustice to that setup that I can’t wrap my brain around.

The Nefarious Plot That Never Was

While many of the individual brokerages opted to settle early, the National Association of Realtors (NAR) went to trial and lost. Recognizing that the appeals process might lead to bankruptcy, NAR agreed to a settlement they could (hopefully afford). The settlement included the proposed rule changes that have everyone in an uproar.

Now, refresher from last week. The most common form of payment a listing agent receives is commission based on the sale price. In most instances, the listing agent offers to split a portion of this commission with a buyer’s agent who can bring a ready, willing and able buyer for the home. The intention of this split from the listing agent’s perspective is to bring as many buyers into the home as possible and hopefully, drive up the price. The amount of split offered to the buyer’s agent is published in the MLS for all to see. Apparently, that transparency is a problem . . . ?

If you look at the headlines, the media says there is some unwritten rule that all listings agents charge 6% and offer half of that to the buyer’s agent. To be clear, the current NAR rules specifically forbid us from discussing our fee structures with other agents or brokers.

Let’s take a peak behind the curtain, shall we?

Boards and associations of REALTORS® and their MLSs shall not:

  1. Fix, control, recommend, or suggest the commissions or fees charged for real estate brokerage services (Interpretation 14).
  2. Fix, control, recommend, or suggest the cooperative compensation offered by listing brokers to potential cooperating brokers.
Policies: MLS Antitrust Compliance Policy

This rule is taken seriously. Anyone caught skating the line in forums on social media are quickly shut down. Honestly, the self-policing is swift and harsh for agents breaking the rules. Most of us recognize that any whiff of price-fixing is detrimental to all of us.

Setting Compensation

Every listing agent negotiates their fee individually with each homeowner. Some homes will take more time and effort to sell. That is just a fact. We have to factor our costs into what we charge. However, like most markets, there is a threshold demarcating what the market will bear. In most areas, real estate agents have determined what their individual market will allow in terms of compensation.

This situation is the same as when you get two quotes on installing a hot water heater. If two plumbers quote you $1600 to replace your 40-gallon hot water heater, are they conspiring to price-fix or have they individually arrived at a price that will cover their costs and allow them to make a living wage in their local market? That same water heater might cost $2200 in another market because the overhead and cost of living are much higher.

There have been discount brokers operating in the market a long time, but they have not gained market share. Why? Their results are generally crap. Have you ever seen a home listed with the world’s worst photos? Taken with a shaky hand using someone’s iPhone? You can literally see the agent in the bathroom mirror? The toilet seat is up? Just like every other industry, YOU GET WHAT YOU PAY FOR!

The benefit of the commission setup is the agent absorbs the costs to get your house to market until you close the deal. That’s right, typically, we pay for listing photos, floor plans, staging, etc. on top of all the not-insignificant fees we pay to access the best platforms to reach those buyers.


A home that is For Sale By Owner (FSBO) typically sells for less than a home sold by an agent. There’s varying scenarios here as often the sale is happening between family or friends. But for a straight up FSBO selling to a stranger who does not want to pay any agent fees, they get significantly less traffic to their home and thus typically receive a lower purchase price.

FSBOs accounted for 7% of home sales in 2023. The typical FSBO home sold for $310,000 compared to $405,000 for agent-assisted home sales.

Quick Real Estate Statistics

Now that stat is a bit inflammatory because many FSBOs are in a rural area where home prices are already lower. Over the years, different sources have ball-parked that FSBOs sell for 8-10% less than agent-repped counterparts, and they end up offering more money to the buyer in the form of concessions. Also, in 2023, 75% of FSBO sellers paid the buyer’s agent some amount.

So if the home sold for 8% less but the FSBO saved 3% [using the media’s nefarious plot # here] on agent commissions . . . that leaves the FSBO . . . with 5% less money AND the owner had to do all the work.

Enter the Buyer’s Agent

Why do FSBOs get significantly less traffic? Because buyers want to have an agent help them with their home purchase! If the buyer has to pay for the home plus their agent, they either (a) start to think other houses look more attractive, or (b) offer a lower purchase price so they come out flat after paying their own agent.

When I bought my first home back in ye olde 2013, I never would have dreamed of trying to navigate that process on my own. Trying to buy a FSBO property without help would have scared me shitless. I would have been even more scared to try to purchase a home that had a listing agent to contend with on my own. It appears to have a similar effect on other homebuyers.

The role that commission split offering to the buyer’s agent is actually an inducement to the buyer to consider purchasing your home. Yes, the buyer’s agent keeps that money when they walk away from the closing table, but it’s a buyer’s wish to be represented that is driving the offer. It is effectively a concession to the fact that most buyers want representation but don’t have the liquid assets to pony up at closing.

The Proposed Rule Changes

So what are the proposed NAR rule changes? This is where the misinformation is completely and utterly rampant. The changes are not actually that astronomical.

1. NAR has agreed to put in place a new rule prohibiting offers of compensation on the MLS.

It doesn’t prohibit offers of compensation to buyer agents. You just cannot advertise them on the MLS. That’s it.

I discussed above why listing agents offer a buyer’s agent a commission split in the first place – to drive buyer traffic to the home to get the best price. I’m curious how this will shake out in reality. Perhaps more buyers will pay their own agent, but how will that impact their budget for purchase price? Perhaps more buyers will go unrepresented, which will likely lead to more lawsuits. Yes, you can use an attorney or title company to aid in the purchase, but they do not function in the same capacity or offer the same knowledge base as a boots-on-the-ground agent.

Bottom line: This rule would upend the normal order of things, but I take a wait-and-see approach here.

2. NAR will require MLS participating agents working with buyers to enter into written agreements with their buyers.

I already require written agreements with my buyers. This agreement protects me to ensure I am not unfairly cut out of a deal I helped procure. It also lays the groundwork for my relationship with my client, allows me explain both my value and compensation as well as answer any questions.

If a potential client does not want to sign an agreement, then I chalk that up to either the potential client is not actually ready to purchase a home OR they are running six different agents all over town. In either case, my energy and focus has to be on my current clients and how to best serve their goals.

Bottom line: No change for me on #2. Some agents may struggle if they cannot articulate their value proposition.

Potential Problems

The media has been so fixated on sticking it to the National Association of Realtors that they have overlooked a lot of potential problems.

  • VA loan rules forbid the veteran from paying an agent so since most agents can’t afford to work for free . . .
  • Low income homebuyers may forego purchasing a home or be forced to navigate the process as unrepresented buyers.
  • Unrepresented buyers will interact with the seller’s agent, who has a fiduciary duty to only rep the seller’s interest.
  • Failing to advertise a flat buyer’s agent compensation opens the door for off-the-books dirty dealings where unethical listing agents can steer the transaction towards a specific agent or brokerage.

Additionally, not to get too deep into conspiracy theories, BUT what is this whole scenario pushing us towards? Buying homes with a click. If you put agents out of the job, there is now cash to grab, right?

Final Thoughts

After sitting with the information and venting to friends, I almost wonder . . . is this development a good thing for me personally? (special thanks to our friend D., of tiny house dreams, who had the pleasure of dealing with my shellshocked self just after the announcement!)

I know my value proposition. I have stripped houses to studs and reassembled them.1 I have an eye for future problems in a house. I listen to my clients’ feedback and help guide them to the crossroads of budget, location and house. I am a fierce negotiator with a strange sixth sense on when and how to push terms. I can get super creative on structuring deal terms to appeal to sellers and their agents. I am happy to explain something three different ways with outlandish examples until the concept clicks for a client. I also have an intense background that benefits my clients. (Honestly, not much rattles you after you question an employee about the potential gun in his backpack with two members of Security packing heat at your back.)

Agents who just open doors and fill in blanks aren’t going to make it in this brave new world. Ultimately, that is a good thing in my book. Agents who aren’t running their business LIKE A BUSINESS have NO BUSINESS being an agent. (I couldn’t help myself.)

We’ll see where this all shakes out in the next months, years and decades. I don’t know that anyone will view this as a great development.

Header photo by brotiN biswaS

  1. Fine. The Mathematician helped. Alot. ↩︎

This Post Has 2 Comments

  1. Mary Guyette

    Thanks for the two articles explaining all of this. This was a lot of info that I wasn’t exactly familiar with, and I enjoyed learning about it.

    1. Dabs

      Thanks for the comment! It definitely is not a straightforward topic and most of the journalists writing about it aren’t living and breathing it.

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