What's This I Hear About Real Estate Commissions?
You might’ve read the news about a jury in Missouri awarding homeowners with a $1.8 billion prize because The National Association of Realtors (NAR) and the big brokerages were found to have conspired together to fix commissions at the 6% level.
This naturally leads consumers in Washington State to ask some questions and wonder if this will have any impact on the way real estate is bought and sold in the Pacific Northwest.
The answer is yes and no. In truth, Washington State residents already have much more freedom and power to negotiate commissions than Americans in other states.
(But before I elaborate, I want to disclose that while I own and operate a Real Estate Brokerage, and carry a Designated Real Estate Broker license, I’m not a member of NAR and so am technically not a “realtor”. Realtor, broker and agent are often used interchangeably by the public, but they in fact represent different organizations.)
NAR owns many of the local Multiple Listing Services (MLS) around the nation and, for better or worse, (worse in the minds of the jury), it can influence what Realtors do and what they charge all across the country.
Every state has different laws and regulations governing real estate, agency and commissions. Fortunately, in Washington State, the largest MLS (NWMLS) is independently owned and not affiliated with NAR so it doesn’t have to play by NAR rules. It’s primarily responsible to its own clients and consumers. In Washington State, compared to most other states, real estate commissions for both the buyer and seller sides of the transactions are completely negotiable and much more transparent than in other parts of the country. For example:
-A seller may choose to offer the buyer broker any sort of commission or no commission at all. The seller’s agent doesn’t get to set that amount as is common in other states.
-Both seller and buyer are required to sign and approve the commission given, if any, to the buyer broker as part of the real estate contract.
-The buyer and their broker have the opportunity to negotiate commissions as part of the real estate contract.
-The buyer and their broker can negotiate their own arrangement for commission between the two of them and either choose to involve or not involve the seller.
Despite all these options, the most common arrangement seems to still be the seller offering a commission if a buyer broker gets the house under contract. But it’s not set in stone that it must be this way.
I can’t speak for the NWMLS, but to me the goal seems to be to ensure that the antiquated 6% system gets an update in the 21st century. Home prices are high, interest rates are high. Listings are online. Competition, even in the current market, is fierce. Homeownership is different now. What a real estate agent does is different too.
Given all that, it only makes sense that the way brokers get paid also change.
Michael Perrone is a licensed real estate broker in Washington State and is the owner of The Perrone Real Estate Group. You can reach his office at 425-224-6040 or by subscribing and responding to these newsletters.