Sedona Real Estate Market April – May 2024

That New York Times article was representative of the press coverage of NAR’s settlement of Sitzer v. Burnett. As often happens with important “breaking news,” the headline spin doesn’t entirely square with the facts. And, it remains to be seen what will be the actual effects of this agreement on the housing market.

NAR did not agree to “slash commissions.” It has never set brokerage fees in the first place, so it can’t cut them. The agreement’s primary mandate, locally, is that, as of mid-July 2024, the Sedona Verde Valley Association of Realtors may no longer permit the long-standing practice of listing brokers offering tosplit part of their brokerage fees with brokerages representing buyers, i.e., “co-brokerage.”

Historical note: Before the1990’s all real estate agents were sub-agents of the seller. Buyer Agency was developed as part of the movement away from “Buyer Beware” to Consumer Protectionism. The role of buyers’ agents was to protect the buyers’ interests and, in the process, protect the sellers from potential lawsuits. Beyond that, the key value of buyers’ agents is in bringing buyers to the negotiating table, guiding them safely through the due diligence process, and completing the sale. Eighty percent of real estate transactions involve buyers represented by buyers’ brokers, so we’re talking about curtailing or, at least, significantly modifying the primary modus for accomplishing sales of property.

Since, often, half of the brokerage fee the listing brokerage charges the seller now goes to the buyers’ brokerage, the NYT article seems to make a lot of assumptions. One is that sellers will not continue to offer incentives to buyers’ agents in some other venue outside the scope of the MLS. Another is, that if sellers don’t compensate buyers’ agents, they will pass those savings on to buyers by reducing their list prices. Neither presumption is necessarily warranted. Since this is such a major change in the real estate business, we’ll make next month’s column Part II of this article: the possible effects on buyers, sellers, and the real estate market in general.

In the meantime, the other mandate from the Sitzer settlement is that, by July, buyers and their agents will be required to sign an employment agreement stipulating, among other things, how the buyer’s brokerage will be compensated. The NYT article seems to assume that buyers willfully fund their broker’s compensation or stop using buyer’s agents altogether. There are, however, any number of other possibilities. Next month, we’ll also look at the buyer’s options and the viability of the Buyer’s Agency itself.

All opinions expressed in this column are solely those of Roy E Grimm and not necessarily those of Sedona Monthly Magazine.