National settlement sparks change in Humboldt County real estate industry

A legal settlement is changing the way local realtors do business. (Shutterstock file photo)

A $418 million settlement in an antitrust case against the National Association of Realtors is changing the way local real estate agents conduct business.

The class-action lawsuit accused the NAR of illegally establishing the commission paid to real estate agents – a negotiable commission of around 6% of a sold home, but in practice, the price was very much non-negotiable, according to the lawsuit. In Humboldt County and the rest of California, real estate agents will no longer list the commission price on a multiple listing service and will hash out signed agreements with prospective clients about the work they’re expected to do and how much they’ll be paid to do it.

Ruthie Jones, a Humboldt County realtor, said she didn’t expect much to change locally in the wake of the settlement, which awaits final court approval slated for this November. Some industry analysts hypothesized that sellers will pay realtors less because of the newfound flexibility to negotiate a commission, which Jones said is potentially true.

“I don’t think anyone has a Magic 8 Ball to know exactly how it will change, but it will definitely open up more conversations and more open negotiations about how the realtor is going to get paid,” Jones said.

She added other realtors dispelled rumors that agents no longer need to be paid a commission at all. They will still take a commission, but per the settlement agreement, their clients now have much greater flexibility in negotiating how much it will be.

Jones also doesn’t expect the second new rule  – not showing a home until signing a written agreement with a prospective buyer about how much the realtor will be paid and what they will do – to impact business much.

“Traditionally, sellers have paid the full compensation for the seller to be represented and the buyer to be represented. But in this scenario, it’s possible that a buyer will have to pay for their own representation,” Jones said.

The NAR reports that roughly 89% of homes are sold with a realtor – which makes sense, given that in order to place your home on a multiple listing service, you need an agent, and the NAR owns multiple listing services, hence the accusation of anti-competitive behavior – but homes don’t have to be sold using them.

Eureka attorney Neal Latt, who practices in real property law, said he’s assisted buyers and sellers of homes on transactions without a realtor.

“One of the most common things that I do as a real property attorney, is when a buyer and seller have connected on their own and come to terms on sale of a property and they just want somebody to get to assist them in walking them through the transaction, including drafting the grant deed and recording it and handling the disclosures,” Latt said.

While Latt, like Jones, said it’s too early to tell at this point how exactly the settlement – if ultimately approved – will impact the housing market, he theorized attorneys could emerge as a party to property transactions, given their significantly lower rates – he said he’s walked people through the transactions for as low as $1,000 – compared with real estate agents, who could still insist on a 6% commission.

To Dennis Beaver, a Bakersfield-based attorney who writes a column published in the Times-Standard, the new signed agreement rules before touring a home are “bothersome,” because in order for a seller to list their home on an MLS, they must have an agent, and if anyone attempts to circumvent the process by reaching out for a home tour without their own agent, allowing the visit could violate their contract.

“It’s a gun to your head, ‘If you don’t sign this, we’re not gonna show the home,’ ” Beaver said.

Like prospective clients for lawyers, Beaver said many people approach realtors not knowing their price is negotiable – and according to the lawsuit, it wasn’t – but they can still bargain for a better price.

“You need to realize, yes, you can negotiate, and it doesn’t have to be a take-it-or-leave-it. Today, I think most real estate agents and brokers are hungry enough, they will negotiate,” Beaver said.

Jackson Guilfoil can be reached at 707-441-0506.