New NAR rules could thin the ranks of Bay Area real estate agents

Real estate agents across the Bay Area are worried that new rules resulting from a National Association of Realtors lawsuit settlement could send them to the unemployment line.

The landmark settlement, effective Aug. 17, will favor the listing agents over the buyer’s agents, who could struggle to convince house hunters they’re worth hiring, the San Francisco Business Times reported.

Ranks of residential agents could be thinned substantially, with the industry’s newbies and bottom-tier producers among the hardest hit.

Under the new rules, buyers’ agents must make a separate agreement with their client — and that client, not the seller’s agent, will be on the hook for paying them.

The National Association of Realtors agreed to make the sweeping change as part of its $418 million agreement to settle class-action lawsuits alleging commission-splitting price fixing in the industry. The association was found guilty last fall for conspiring with other organizations to violate antitrust laws and inflate agent commissions.

Some have dismissed the idea that it would trigger an industry-wide shift, while others predict the new rules around commission sharing could thin residential broker earnings and agent ranks.

The post-deadline reality remains to be seen — but groups big and small are rolling out changes to get in line with the settlement, providing the first hints of how platforms and brokerages will build the road ahead for agents.

Also benefiting are the alternative service providers who have faced an uphill battle to establish a toehold on turf that has been zealously guarded by agents and big brokerages tied to the old commission structure, according to the Business Times.

If commissions go down, people buying and selling homes might also end up saving money on transaction costs.

As buyer’s agents will no longer be part of the listing agreement, home hunters may simply go straight to the listing agent, or work through discount companies to make a purchase.

Redfin advertises as low as a 1 percent fee for the Redfin agent, compared with the 3 percent a buyer’s agent would expect to collect while splitting a traditional sales commission of 6 percent.

Meanwhile, more buyer-representative competitors are cropping up and offering flat fees in lieu of a percentage. Some players who’ve been in the game for years, such as San Francisco-based Opendoor Technologies, are seizing on the new opportunity.

“As buyer broker commissions decline, and direct sales from listing agents to buyers increase, Opendoor will be able to lower the spreads we charge and offer higher cash proceeds to sellers at the same margin,” the company stated on its website after the NAR settlement was announced.

Longtime buyer brokers say their negotiating skills, knowledge of properties and the market and experience steering buyers around the potential pitfalls of the process create value that buyers will be willing to pay for. But they realize the ground has shifted.

“Discount brokerages are nothing new, but we are likely going to see an influx of more of them,” Vanguard Properties co-owner Frank Nolan told the newspaper. “But you get what you pay for.”

— Dana Bartholomew