A national settlement on real estate commissions last year brought predictions of monumental changes to the homebuying process. A year later, little has changed.
“The short and skinny of it is it’s much ado about nothing,” said Tara Limbird, a co-owner of Limbird Real Estate Group, which has offices in Rogers, Fayetteville and Fort Smith.
The settlement brought an end to a series of class-action lawsuits in which plaintiffs alleged that some policies and practices by Realtors amounted to a conspiracy that hurt homebuyers. The lawsuit centered on how the agents who represent buyers get paid when their client buys a home and how that part of the transaction is disclosed to the buyer.
The settlement applies to Realtors, who are members of the National Association for Realtors, not all real estate agents and brokers. The association admitted no wrongdoing in the settlement.
In a typical home sale, the seller pays the commission, which is split between the seller’s agent and the buyer’s agent. The cut of the deal that goes to the buyer’s agent can vary slightly from home to home.
The total commission on a sale is typically about 5%-6%, according to most estimates. A survey of hundreds of real estate agents across the country estimated that total Arkansas commissions are 5.41% this year compared with 5.3% late last year and 5.44% in 2023.
The survey estimated the average commission rate for a listing agent in Arkansas this year was 2.73% and for a buyer’s agent 2.68%. In October, the survey estimated listing agents in Arkansas were getting 2.75% and buyer’s agents were getting 2.55%.
Plaintiffs’ Argument
The plaintiffs argued that the negotiation over how much the buyer’s agent would get in the deal occurred outside the purview of the buyer because the commission rate was listed in the industry’s computerized multiple-listing services, commonly known as MLS.
Realtors could see how much they might get paid if their buyer bought one house as opposed to another and could even filter the real estate listings based on the commissions they would receive, according to the plaintiffs.
All of that created an incentive for the buyer’s agent to steer clients to listings with higher commissions for the buyer’s agent, all with clients unaware, the plaintiffs said.
Limbird, 48, has spent 21 years in the real estate business and disagrees with that argument. The varying rates paid to buyers’ agents, she said, amount to a marketing fee that encourages agents to show a property that might be difficult to sell.
“I don’t think a buyer’s agent is capable of making them buy something they don’t want to buy, but it might put it in front of more people,” she said.
But the national association put any concerns over that issue to rest when it signed a settlement that made changes to a few industry practices.
Among the terms of the settlement were:
- A prohibition against publishing compensation offers on MLS.
- A requirement for a written agreement between buyers and their representatives before touring a home.
- A payment of $418 million over approximately four years and no change in membership dues in 2024 or 2025.
- The association’s denial of any wrong doing.
Some Differences
One change from the settlement has been the signing of buyer-broker agreements before agents can give tours of properties to prospective buyers. Notably, the settlement doesn’t require agents to get the documents signed before showing properties at open houses or when prospective homebuyers are interviewing potential agents.
Bob Bushmiaer, an executive broker at Little Rock’s Janet Jones Co., had to sign a buyer-broker agreement with prospective buyer George Ramirez before the pair could walk through a house in Little Rock’s Hillcrest neighborhood this year.
Bushmiaer, who has been in the business more than 20 years, said the process with buyers now is similar to what his agency does with sellers who sign an agreement with the company to list their house.
“It’s saying that you’re going to let me work and negotiate and do everything I can on your behalf to get you the house that you want at the best possible price,” he said.
Bushmiaer estimated that nine out of 10 sellers he encounters agree to pay the buyer’s agent’s fee as they traditionally have.
The agreements typically tie the homebuyer to the agent for a period of time, so Bushmiaer said he’s seen fewer instances of clients bouncing between agents. The terms vary between agencies and the terms are negotiable, Realtors have said.
Ramirez, who eventually bought the black two-story Craftsman-type home in Hillcrest, had paid close attention to news of the settlement last year. The 52-year-old software engineer had bought homes previously, so he was already familiar with the process and the services that come with using a certain broker. Ramirez also thinks homebuying and all the related documents can be “overwhelming” for new homeowners.
“This is a complicated thing to unravel,” he said. “I think it probably makes the biggest impact to first-time homebuyers.”
While some aspects of the agreements are new, Arkansas Realtors had already been signing similar agreements with prospective buyers in accordance with Arkansas state law, according to Andrea Alford, CEO of the Arkansas Realtors Association. Arkansas law requires real estate agents and brokers to “clearly disclose to all parties or to their agents which party or parties he or she is representing.”
‘Fully Negotiable’
“The Arkansas Realtors’ message has been clear: Buyer agreements are not new, and commissions have always been fully negotiable,” she said.
But some things have changed. Thanks to the settlement, agents have to disclose how much they’ll get paid (either an amount or a percentage) and who will pay it (the buyer or the seller).
Alford said the association has made some adjustments to forms “to provide additional transparency around compensation terms” and has worked with the Arkansas Real Estate Commission to further training and resources for agents.
Arkansas was already a leader in client satisfaction, Alford said, evidenced by the state’s low rates of complaints to the commission and low numbers of civil complaints related to brokerage activities and real estate contracts.
Melissa Goff, executive director of the commission, said Arkansas has a low rate of complaints relative to the number of licensees, but said her agency has received a few complaints from buyers about having to sign buyer-broker agreements since the settlement went into effect. Still, there has been no significant uptick in complaints, she said.
Speaking from her office in Rogers, Limbird said the impact of the settlement has been minimal and that home prices in Washington and Benton Counties have increased 7.5% this year vs. the same period last year. That shows the changes in the commission structure aren’t impacting prices, she said.
“I wish we were that important,” she said. “But what an agent gets paid has no bearing on the prices of real estate.”
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