Jim Fite’s half-century of real estate experience means that right now he’s playing the role of comforter-in-chief for one of the largest residential brokerages in Dallas-Fort Worth.
That’s because the $418 million NAR settlement flipped the script on the home sale process. Understandably, brokers at Century 21 Judge Fite Company, as well as their peers nationwide, panicked.
The settlement banned brokers from negotiating commissions through the MLS. It also now requires buyers’ agents to have clients sign representation agreements before starting to work together.
Brokers now know what they can’t do moving forward. But a new normal has yet to set in.
Is the industry going to look different?
“I’m pretty sure it will. For better or worse, we adjust to that. Change has happened before, and you adapt to it,” said Thomas Mouton, chairman of the Houston Association of Realtors.
If you’re one of the few real estate titans who’ve been in the industry since the 1970s, this isn’t your first rodeo as far as antitrust lawsuits go, Fite said.
A predecessor to Sitzer/Burnett came in 1980 when the U.S. Supreme Court ruled that real estate commissions are subject to antitrust laws and brokers could be sued if they conspire to fix fees.
Fite’s 50-plus years of experience also means he’s familiar with the folks who try to make money off of this kind of confusion.
So he’s telling his people a few things. First, this isn’t new. Second, if anyone purports to know what’s next for the industry, “I would really question their convictions.”
‘A difficult day’
Texas’ various NAR affiliates are striking different tones in their responses.
The Texas Association of Realtors put out a statement reassuring members that the organization is awaiting court approval prior to outlining how to move forward with potential plans to address the impact. The approval process, which takes several months, could be announced as early as this summer.
The Dallas NAR affiliate, MetroTex Association of Realtors, responded as if to a tragedy; its statement said the news made March 15 “a difficult day for our industry.”
Meanwhile, HAR tried to put on a happy face. The new structure will direct agent and broker compensation toward the consumer, the organization argues, and commissions have “always been negotiable,” Mouton said
All three organizations are named in a separate lawsuit that parallels the Sitzer/Burnett case. Texas-based homebuilder QJ Team and holding firm Five Points Holdings sued the NAR affiliates in a federal court in November.
The Texas case casts a wide net, implicating the Austin Board of Realtors, San Antonio Board of Realtors as well as more than two dozen brokerages, like Ebby Halliday, Greenwood King and JPAR Real Estate, along with a slew of Texas-based Keller Williams teams.
Michael K. Hurst, one of the attorneys representing QJ Team, said his team is “still evaluating” the recent NAR settlement’s impact on the copycat Texas case, but nonetheless wants to upend the Texas real estate market’s fee structure.
“There are a number of serious concerns and questions, including the amount of recovery to the actual consumers [in the NAR settlement],” he said. “I would note that neither the Texas clients nor the Texas defendants were direct parties to the settlement discussions or the proffered resolution.”
In addition, the NAR settlement still needs approval.
Residential real estate trade groups are hulking organizations, with membership spread across geographies and career levels. HAR has hosted webinars with legal counsel and created FAQ pages. That doesn’t mean agents are taking them up on it, though: Mouton said attendance has been noticeably low.
“Anyone that says that they’re in the dark, they’re probably just not informed or engaged,” he said. “A lot of people want specifics, they want to know exactly how it’s going to impact them and exactly when, but that’s still to be determined.”
What will change?
What brokers do know is that this settlement spells the end of 6 percent commissions.
While a 6 percent commission split among buyer’s and seller’s agents is standard, brokers are quick to fact-check the headlines.
“Commissions have always been negotiable,” said Keith Conlon, president and CEO of Allie Beth Allman & Associates, a luxury brokerage in Dallas.
“If you Google what the average commission was in 2023, 2022 and 2021, you’ll get three different answers,” Fite said.
As of Dec. 2023, 18 states required written buyer agency agreements, according to the South Carolina Realtors. Texas is not one of them, but the state’s NAR affiliate has a standard buyer representation agreement that is available for use.
“My wild guess is that the vast majority of the agents don’t get them before they put a person in their car,” Fite said.
This requirement could make it more difficult to shop for the right broker, Conlon said. Forcing a client to sign a contract before the two parties know each other seems to him like “a huge mistake.”
It could also complicate typical industry practices, like the open house.
“Are you going to have a bunch of people sign one-day or two-day contracts to see a house or two,” asked Conlon?
He added, “There are a lot of unanswered questions.”
Amy Bernstein, founder of Houston-based boutique firm Bernstein Realty, thinks media coverage has inflamed concerns.
“A lot of the conversation is preliminary, a lot of fears are preliminary, a lot of the uncertainty is preliminary, and a lot of the new procedures are preliminary,” she said. “The national headlines getting things wrong are causing a lot of angst.”
She racks the reactions up to misinformation. She founded Bernstein Realty nearly 40 years ago and says she’s “very protective” of her profession and the real estate industry. Would-be homebuyers are in a tizzy, and agents have to quell their clients’ fears of their clients based on incomplete information.
Mouton agreed. “I think part of that is when the settlement news broke, the average agent just took that information and from there started building their own theories and thoughts of how it’s going to look going forward,” he said.
The domino effect
Brokers everywhere have been quoted saying that homebuyers with tight budgets will forgo representation to save upfront costs as a result of the settlement.
But Fite is looking one step ahead at what effect that would have on the already crisis-level issue of housing affordability.
If first-time homebuyers are less successful at entering the housing market, reduced demand for entry-level housing could be an opening for other buyers.
“Investors have a field day in that world,” he said. “The next domino that falls could be: rents go up for these folks.”
The settlement will be even more damaging to veterans buying homes with Veterans Affairs loans, Fite said. As is, VA loans don’t allow borrowers to use the loan to pay fees or commissions except under special circumstances.
As a result, an upfront buyer agent fee structure could leave out veterans.
“There are the dominoes that plaintiff lawyers don’t give a rip about,” Fite said.
Sifting out quality
Because some buyers may be tempted to opt out of representation, the number of brokers may shrink. Highly professional brokers should already be demonstrating their value to every client, Fite said.
“Our clients should know how we’re paid. Our clients should know what we’re going to do to earn our fee,” he said.
The less trained? “They’re going to have to up their game,” he said.
According to Berstein, clients will know the difference.
“Time will tell, and if and when people want to represent themselves in the transaction, then maybe they’ll appreciate the role the real estate broker has served in the past and will continue to serve in the future.”
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