Here is what the fuss is all about in the class action lawsuit surrounding realtor commissions: More disclosure is needed, period. But who really pays realtor commissions anyway? Well, that depends how you want to look at it. For years, many would irrefutably argue that all realtor commissions are paid by the seller, from the seller proceeds. But bring on the inquisitive buyer who raises the valid question, “Hang on, I’m the only one bringing a check to the closing table, so therefore, am I not ultimately paying the realtor commission in the form of it being ‘built-in’ to the asking price?”

And if you follow this logic, then it raises at least three more questions: 1. Shouldn’t the buyer at least be entitled to know what the commissions are, since those negotiations occurred between the seller and the listing agent before they were ever even involved? 2. Shouldn’t there be more of an industry standard for what commissions are allowed to be? And 3. Are commissions, in fact, artificially inflating asking prices, and therefore the entire housing industry in general?

These are all very complex questions, and hence, why there is only a proposed settlement and not an actual settlement or a solution going forward, as it will likely take much more time to reach a solution that satisfies all parties involved. And when I say “all parties involved” – I am not just talking about sellers and buyers. I am talking about listing agents, their brokers, buyers’ agents, their brokers, Realtor Associations and licensing boards.

The proposed settlement does not eliminate commissions or establish new rates; rather, it restricts listing agents from disclosing in the MLS how much they offer to the buyer’s agent; agents can still share this information through other means. This settlement is pending court approval, which may take several months. Buyers and agents can request seller credits for buyer’s agent fees, while sellers retain control over offers, giving buyers the choice to accept or decline. But let’s get back to the three surrounding questions…

Q: Shouldn’t the buyer at least be entitled to know what the commissions are, since those negotiations occurred between the seller and the listing agent before they were ever even involved?

A: Probably. Some national companies finding themselves named in this unflattering spotlight have been known to charge as much as 7% or more, with an unproportional breakdown of 5% to the listing side and 2% to the buyer side, claiming that they have a whole team to support and ‘realtor residual income’ business models of recruiting agents under them to support. But that pyramid should not be the consumer’s problem.

Q: Shouldn’t there be more of an industry standard for what commissions are allowed to be?

A: Definitely. This used to be clear-cut at 6% no matter what. 3% to the listing side, and 3% to the buyer side. But then came your discount brokerages and do-it-yourself models of less services for a discounted commission. This becomes confusing to the consumer – for sellers and buyers. Sellers, how do you know how to compare what you’re getting for your money if they are all presented that they all get you to Zillow and that’s all that matters?! Well, it’s not all that matters. A full-service agent will invest in professional photography, a wide range of marketing efforts, host open houses, and fluent communication throughout the whole negotiating process. Discount services can save you money if they actually get the job done, but in many cases, they waste your time before you realize they are not enough to get the job done, without proper disclosure of the things you’ll be thrown to the wolves on your own to handle. There should be more industry standards on disclosing what includes what!

Q: Are commissions, in fact, artificially inflating asking prices, and therefore the entire housing industry in general?

A: I don’t think so. Who would handle the services if commissions were removed altogether? Who would be the licensed person with a background check to take strangers into strangers’ houses? … As well as the next 10 steps that come in the real estate transaction process? Would you perform your own brain surgery or any other profession that you are not accustomed to specializing in and expect satisfactory results? When you sit down to buy a car, do you ask the salesperson what they are making on the deal or the dealer what their profit is on the car? No. You just assume that the services involved with the process impact the sale in some way and that you wouldn’t have known about that car if it weren’t for the dealer, and well, that is just the cost of doing business.

So, where do we go from here? Do we revert back to no buyer agency at all and the listing agent must do everything to accommodate every buyer but let them continue on to the next listing and the next listing agent if they don’t buy that exact house. That doesn’t make sense. That would be going backward in time and progress. Do we start making buyers pay commission? Do you think they will voluntarily be happy about that after decades of not paying (at least out of pocket) for realtor commissions for their own representation? How many buyers, especially first-time buyers, can even afford a down payment plus closing costs, much less paying a realtor out of their own pocket? So, who would accommodate them? Ten different agents if they look at 10 different listings? So troubling!

Tiffany Hazelwood

Tiffany Hazelwood has a degree in Journalism from the University of Richmond is a full-time Real Estate Broker with Lake Homes Realty, a lake-focused real estate firm, where she serves as the Anchor Agent for the Lake Anna market. She has been a licensed realtor since 2008 and has been specializing in real estate here at the lake since 2016. She has enjoyed writing the real estate section for the Lake Anna Breeze™ since 2019. In her spare time, Tiffany enjoys jet-skiing and boating on the lake, traveling with her boyfriend, Tom, and time with their 3 dogs.