by Zain Jaffer
In October 2023, a Western District Court in the state of Missouri passed judgment on the case of the Sitzer Burnett agent commission class action lawsuit versus a group headed by the National Association of Realtors et al, on the basis that the current practice of buyer and seller commissions violates the Sherman and Missouri state Antitrust Act.
The current practice stated by NAR and most other realtors is a 50-50 split of commissions between buyer and seller agents, when the property being sold is listed on a Multiple Listing Service (MLS). While Sitzer Burnett is currently being appealed, already there are similar class action suits in other states that argue the same.
The Sitzer Burnett plaintiffs/complainants alleged that as property sellers, they should only pay for the agents that represent them as the seller, and not the buyer, as is standard practice.
Instead of wading into legal ground that will be litigated in many states, let me instead come to the defense of the value of having a real estate broker, whether you are a buyer or seller in most cases, and why it is actually advantageous for you to pay for their services.
Now granted that if a seller or buyer has already done these transactions many times in the same area, is familiar with the contracts and the properties in a given location, then what that person may just need is an accountant and lawyer to handle the paperwork. Granted that there is money to be saved in not using a buyer’s agent in those cases, and even sometimes a seller’s agent, if that is feasible.
These days, when money is tight, when many families are having to contend with higher mortgage rates, higher rents, inflation increases in energy and food, student loans, higher interest credit card bills and car loans, it is understandable to try and scrutinize every dollar spent.
This is also not to defend all agents, especially those who don’t really give good services to their clients, whether their client is the buyer and the seller, when they try to collect their fee when they have not really done anything worthy of payment. Admittedly there are those kinds of agents. But I do believe that those are in the minority. The vast majority of agents have earned their professional reputations and their fees and are just trying to do good.
Admittedly also as Artificial Intelligence (AI) and listing sites become more sophisticated, a lot of listings give simplified information and good guidance to buyers and sellers, even featuring video guided tours of listed properties, and average home prices in the general area.
With those cons, let me now tell you why it is still in your best interest as a buyer or seller to have an agent, particularly if you have not really bought or sold houses before (or that often) or even if you have, are unfamiliar with the area and the properties in it.
For most people, a house will be the single most expensive investment and expense they will make. It is literally the American Dream to own your own home.
What if in trying to save a few dollars, you end up with a home that you do not like? Tough luck. You will be paying for it, if you have a multi year mortgage, for several years. Will you blame the AI software for telling you that? Will the AI software ask the neighbors what they think of that house? Maybe the AI or the website can use aggregate data from a database somewhere, but does that database reflect things that normally do not get gathered, like do drug dealers live a few houses down the road, and so on? More often than not, those types of information are not in the public record. If those are, those are hard to dig up.
Any home purchase is always an adversarial undertaking between the buyer and the seller. Not in an unfriendly way, but both parties have opposing interests. One wants to maximize profit with the sale, the other wants to minimize the price. If a buyer goes to a negotiation without an ally who knows the area, the business, and the contract, is that person ready to accept the consequences of not getting good advice? For something you will need to live with for many years until in turn the house is sold to another party? Of course not.
Modern tools like AI and listing websites give us a lot of information. But in getting your piece of your American Dream, is it not more important to get the decision right, than to quibble over paying a broker?
You could choose to do so, but if your American Dream home turns out to be a nightmare because you scrimped on the broker fee, you will have to live with that.
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