Will the buyer’s agent disappear? 

Here’s my opinion article (not legal statement or legal advice, I’m not an attorney, just a realtor) about the most recent Missouri federal jury decision on the trial of Burnett v. NAR et al. 

After a few weeks of trial, the jury awarded 1.8 billion dollars in damages to the plaintiffs and about 500,000 Missouri home sellers.  The defendants, National Association of REALTORS®, HomeServices of America and Keller Williams Realty are planning to appeal the jury’s decision.  

If this decision become a catalyst to change the current real estate law and the rules, the future of home buying process could become: 

• Buyer agent commission can be prohibited to be paid from listing agent’s commission from the seller’s proceeds. 
• Buyer may have to communicate directly with the listing agent or seller and the buying decision to be made based on the information given by the listing agent and seller.
• If a buyer may need to hire his/her own agent, the buyer will have to pay the agent directly out of his/her own pocket.  
• Either buyer agents slowly disappear or the number of agents might be reduced significantly.  Similar to the property manager model which typically represents landlord and buyer deals with the manager or landlord directly with no buyer’s agent representation. 
• More buyer’s attorney positions can be created to protect buyers.  The attorneys will need to learn how to value home prices and predict resale value issues in advance and understand repairs/repairs costs to service the buyers correctly. It’ll probably get more expensive to the buyer, because buyers need to pay the attorney even if the sale fails unless attorneys agree to be paid only when the transaction closes like the current realtor fee compensation structure. 
• Uber like opening door to listing services will be needed since attorneys will be too expensive to drive and open the door for the buyers. 
• RESPA rule might need to be modified in order to include buyer’s agent commission to the loan amount, so buyers may be able to afford a buyer’s agent representation. Currently, it is illegal since it is considered a “kickback.”

Regarding buyer paying for buyer agent service, these questions would arise. 

• Can buyers afford additional cost of agent fee on top of paying down payment, loan fee, earnest money, portion of property tax and part of escrow fees? 
• It would lower buyer’s buying power due to higher cost (including buyer agent fee) -> lowers buyer’s demand -> lowers the home price -> sellers make less profit. 

My questions are: 

• Will the jury decision benefit mostly sellers going forward, assuming some of my above predictions become reality? 
• Do the plaintiffs’ allegations only focus on the sellers’ point of views and benefits and ignore buyers’ point of view?

Did the defense counsel bring in some of the buyers to testify about the services that they received from their buyer’s agents.  Questions like:

• Did you get good help from the buyer’s agent? 
• Could you have bought that property without the buyer agent’s help? 
• Do you think you could have won the house if the property received multiple offers? 
• Did the buyer’s agent help you to win that house? 
• Do you think the buyer’s agent deserved to be paid the commission via the seller’s proceeds?
• Did you know that your offer price included the buyer’s agent commission? 
• Would you hire a buyer’s agent again when you buy your next home? 
• Would you hire if you have to pay the BAC out of your pocket?  Assuming not paid via listing agent’s commission. 

Wouldn’t these questions support the defendant’s case? Per Antitrust Law, I would think this will answer some parts of the current home buying processes that align and support the law.  

Antitrust Law from ftc.gov: 

“The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. Courts have applied the antitrust laws to changing markets, from a time of horse and buggies to the present digital age. Yet for over 100 years, the antitrust laws have had the same basic objective: to protect the process of competition for the benefit of consumers, making sure there are strong incentives for businesses to operate efficiently, keep prices down, and keep quality up.”

One possible solution? 

1. Buyer’s agent and buyer agree on a BAC (Buyer Agent Commission) prior to working together and before touring any homes as part of buyer service agreement.  Once agreed, it becomes non-negotiable to protect the buyer’s agent’s compensation in the offer negotiation process.  
2. When the buyer submits an offer, add that previously agreed BAC amount in the offer as part of the sales agreement.  BAC is fixed and purchase price can vary reflecting the BAC.  
3. This way, the seller has choices of agreeing or not agreeing to the offer. 

Isn’t the current commission system a simplified version of the above solution?  One key difference would be how and when BAC is valued and agreed on.  I suppose this is where BAB (Buyer Agent Benefits) talk is necessary. 

Here my own BAB (Buyer Agent Benefits) when I work with my buyers: 

• Provide pros and cons of listings. 
• Provide accurate fair market value by comparing with comparable sold homes and pending homes which protects buyers from overpaying. 
• Help saving money on price negotiation, repair negotiation, appraisal negotiation. 
• Inform buyer’s rights and transaction time frame for successful closing. 
• Address any future resale issues on value and condition when buying. 
• Ultimately, saving the buyer’s time, effort and money.  New listing alert is at the bottom of the benefits, thanks to the internet and great websites. 
• And more…

I had been cut out of deals after spending a month or more showing a few buyers more than dozens of homes and not making any money because the buyers didn’t honor my effort and worked directly with the sellers’ agent and/or another buyer’s agent.  Those events cost so much financially and emotionally. 

Looking ahead:

Will we see a reverse class action lawsuit filed by the buyers demanding refund from the sellers and listing agents in the future?  Do we need to focus on raising the bar for Realtors, not so much on changing the system that has been working for decades.

Potentially taking away this buyer protection service, aka buyer’s agent service, could really damage buyers’ buying position significantly.  I’m very concerned with this jury’s decision and how it might impact the future of the real estate market, especially for the consumers.