LA Residential Agents Ready for NAR Deadline

A couple posted on Reddit with a question from their search for a Pasadena-area home. They “love” their broker, they wrote.

Still, they hope to negotiate her commission under the new NAR rules, and asked fellow Redditors if it was true they must sign papers before seeing a single property.

Enter a myriad of responses and opinions that make clear confusion still abounds on the eve of the National Association of Realtors’ deadline for new rules stemming from the Sitzer-Burnett class action lawsuit in Missouri federal court.

“If you ask the average person what the MLS stands for, they’re going to say, ‘Major League Soccer,’” said The Agency’s Jon Grauman. “Most people don’t understand the terms and nomenclature of real estate. Why would they? It’s not part of their daily lives.”

But the stakes are becoming clearer. The California Regional Multiple Listing Service released an updated fine schedule for the new rules, including a $2,500 penalty for disclosing listing or buyer agent commissions and $2,500 for showing a property without a signed buyer agreement. Agents receive no warning for either infraction, just the bill.

There’s no excuse for agents who are still confused, said Anthony Marguleas, the founder of Pacific Palisades-based boutique brokerage Amalfi Estates.

“The lawsuit started in 2019, so we’ve technically had five years to get ready for this,” Marguleas said. “The people that aren’t ready, it’s pretty surprising. There have been hundreds and hundreds of emails and trainings over the last six months.”

Marguleas said some of the discourse he’s seen in online industry forums has baffled him.

“It’s pretty shocking how unprepared certain agents are,” Marguleas. “They still put in the private remarks, ‘Call me to discuss commission,’ which you’re not allowed to do.”

Stating the obvious

The Agency’s Ben Belack headed the brokerage’s sales meeting held days ahead of the deadline to discuss the new rules with his colleagues.

While he believes the brokerage’s agents understand the changes, the challenge is wrapping their minds around new conversations and clarifying client questions.

“Before, we had a standard of compensation. Now, we’re going to have a standard of behavior,” Belack said.

A common refrain around how brokers will adapt to increased negotiation and competition has been proving the value of agents’ work. Grauman said for most, that could feel like stating the obvious.

“Our job as brokers right now is to educate, not defend. There’s nothing for us to defend,” Grauman said. “We just need to educate consumers on what’s the new world order. These are not changes to the law; they are changes to the internal way we conduct our business.”

More turns ahead

Ask anyone to forecast the state of the industry post-Aug. 17, and the responses reveal more questions than anything else.

“Have you looked at how this is meant to be policed?” Grauman said. “They’re going to look to agents to essentially tattle on each other if someone is not abiding by the rules.”

One thing many agents have concluded: more litigation is likely.

“The lawsuit that started all of this had nothing to do with buyers; it was only sellers. So there’s dozens of additional lawsuits,” Marguleas said.

Days before the deadline, a group of Signature Sotheby’s International Realty agents filed an antitrust lawsuit in Michigan district court against the National Association of Realtors, the Michigan Association of Realtors and other industry groups. The lawsuit challenges those group’s requirement of membership and seeks class action status, according to court documents.

Belack views ramifications of the Sitzer/Burnett settlements as not just limited to altering the way the NAR membership operates. Instead, it also stands to shake up how the trade organization itself operates.

“Before, it was the sellers as the plaintiffs in the class action,” Belack said. “Now, it’s [NAR’s] membership. Did we ever think agents were going to sue NAR? Well, here it is.”