Anywhere Real Estate’s decision to settle two cases challenging the sales commission structure for residential agents could disrupt how home transactions are currently managed.
However, while this settlement is unilateral, it does not cover any of the other defendants in the two cases involved (Moehrl and Sitzer/Burnett), particularly the National Association of Realtors.
That could make it difficult to determine broader impacts, including on mortgage qualification and underwriting, of a potential shift in compensation source and amount regarding buyer real estate brokers.
Under current multiple listing service rules, the listing broker must offer compensation to the buyer’s representative as part of getting the property onto the system. Some have argued that making the buyer responsible for the fee would negatively affect what they are able to purchase.
Published reports give Anywhere’s settlement an $83.5 million value, but specifics are not yet available.
“The path to obtain final approval and implement the settlement is a long one, and Anywhere has taken the first important step toward a resolution that not only releases the company but also our affiliated agents and franchisees,” a company spokesperson said in a statement. “We believe the settlement will remove future uncertainty with respect to the upcoming trial, potential additional claims, and legal expense, enabling Anywhere to focus on and continue delivering what’s next for agents and franchisees.”
It could not comment any further given the ongoing legal matter and confidentiality agreements, the spokesperson said.
Indications are that Anywhere would make significant changes to how it handles compensation in transactions, but the lack of details makes it difficult for an assessment of the effects of those changes, a report from Thomas McJoynt-Griffith, Ryan Tomasello and Bose George of Keefe, Bruyette & Woods stated.
“We believe a shift toward optional cooperative compensation is a likely consideration as part of the settlement, at a minimum,” the KBW analysts said. “We note that this would technically put Anywhere’s practices at odds with NAR rules, but it is also unclear whether making cooperative compensation optional will actually change industry commissions in practice.”
During the Trump Administration, a settlement with NAR was reached but the U.S. Justice Department reneged on the deal following the election of Pres. Biden.
While settlement is always an option in cases like this, NAR’s commitment to defend itself remains unchanged and its compensation rule will survive the legal challenge, a statement from Mantill Williams, its vice president of communications said.
“The practice of the listing broker paying the buyer broker’s compensation saves sellers time and money by having so many buyer brokers participating in that local marketplace and thus creates a larger pool of buyers for sellers,” Williams said. “For buyers, these marketplaces save them the burden of extra costs at closing, enable them to receive professional representation and make homeownership possible for more people.”
In fact, Anywhere has argued that mandatory participation in the compensation scheme by seller brokers is not required to have “a well-functioning” home sales market, added BTIG analyst Soham Bhonsie.
Some MLS systems already allow for the selling broker to offer as little as $0 in commission to the buyer counterpart.
“Over time, sellers could decide to pay less to a buy-side agent which could lead to some comp compression (and potentially fewer showings), but the pace at which that could occur will be dictated by what brokers will allow to be charged at a local level as well,” Bhonsie said. “We think most brokers will continue to mandate a minimum compensation level for their agents to do business, which could in turn delay the impact to the buy-side agent.”
Taken to the next logical step, fewer showings are likely to translate into a lower number of sales, which in turn could potentially drive down mortgage origination volume.
The settlement of a third case was also unilateral, although it involved an MLS. At the time of the agreement in Nosalek v. MLS Property Information Network, one broker questioned whether NAR could survive the changes because of the amount of money at stake.