The National Association of Realtors on Friday announced a landmark deal that many in the industry are celebrating as the biggest change to how Americans buy and sell homes in decades – but Maine real estate professionals say that while it’s a shake-up for the industry, it will have little effect on the Pine Tree State. And if there are changes, they say they likely won’t be positive.

A federal judge ruled in November that the National Association of Realtors and several major brokerage firms conspired to keep commissions artificially high, which in turn stifled competition and increased home prices.

The national association vowed to appeal the decision, but on Friday, it instead announced a settlement agreement to pay $418 million in damages and dismantle the industry’s long-standing “bundled” or “coupled” commission structure, in which sellers pay both their broker and a buyer’s broker. The settlement is still subject to a judge’s approval.

It also comes with a new set of rules, some of which will bring other states in line with practices that Maine has already been following.

“Luckily, in Maine, we’ve been doing it the right way for a number of years,” said Paul McKee, president of the Maine Association of Realtors and a broker with Keller Williams in Portland.

The agreement bans the NAR from establishing any rules that would allow a seller’s agent to set compensation for a buyer’s agent and prohibits agents’ compensation from being included on the centralized listing platform known as the multiple listing services.

In some states – not including Maine – agents could search the MLS by compensation. Critics argued this led buyer agents to steer clients toward more expensive properties. Agents can continue to pursue compensation through negotiation with other real estate professionals outside of the MLS.

Another proposed rule under the settlement would require buyers’ brokers to enter into written agreements with their buyers. Maine has for years mandated that homebuyers and agents sign a written buyer’s agent agreement, which includes the agent’s commission and how it will be paid.

The changes, if approved, are expected to go into effect in July. 

Any major change to how an industry operates will have an impact, McKee said, but Maine’s business model will likely protect the state from too many ripple effects. 

Traditionally, sellers’ and buyers’ agents split a commission – typically between 5% and 6% of a home sale price. The median home price in Maine was $353,000 in February, so the agents would divvy up anywhere between $17,650 and $21,180. Sometimes, the split is 50/50; other times, it’s some other configuration. The split is predetermined by the seller, and the fees for both agents are usually baked into the list price.

This gives the impression that the seller pays for the commission, but real estate agents say that’s a misconception. Higher fees for sellers mean higher costs for buyers.

To prevent price fixing, it’s illegal for agents to discuss their commissions or fees with one another, though they can discuss splits.

The general air of secrecy surrounding commissions also keeps buyers in the dark, preventing them from shopping around, creating competition among agents and therefore lowering commission rates, the lawsuit alleged.

Brit Vitalius, owner of Vitalius Real Estate Group in Portland, said he doesn’t expect Maine real estate to be flipped upside-down, but he hopes the decision will result in more transparency.

“We need to be better about having the conversations about money in real estate transactions. This will force us to all be adults and all talk about money in a way we currently don’t have to,” he said. He added that this could lead to more respect between brokers. 

The NAR continues to deny any wrongdoing in connection with the MLS cooperative compensation model, the trade group said in a statement Friday, adding that the model was a response to calls from consumer protection advocates for buyer representation. 

“Ultimately, continuing to litigate would have hurt members and their small businesses,” Nykia Wright, interim CEO of NAR, said in the statement. “While there could be no perfect outcome, this agreement is the best outcome we could achieve in the circumstances. It provides a path forward for our industry.”

UNINTENDED CONSEQUENCES 

National real estate experts and publications are touting the agreement as a major win for consumers. They say the settlement will drastically reduce the cost of selling and buying homes, but Maine industry members are skeptical.

“The idea that I’m suddenly going to pay less in commission and suddenly pay less (for a house) is a false narrative,” said Tom Landry, owner of Benchmark Real Estate in Portland.

Agents will still need to get paid. Upending the industry’s commission-based model could prompt agents to start charging hourly fees, a flat rate or an a la carte-style system. But Maine agents don’t see that working here.

“It’s much, much better for buyers to have the fee to their agent coming out of the sale because that means the fee was financed,” Vitalius said.

He said buyers’ agents will likely negotiate with sellers and their agents directly to find a way to fold compensation into the sale.

“That’s where all the money is,” Vitalius said. 

Landry agreed and said most buyers – especially in a more rural, low-income state like Maine – cannot afford the upfront cost of a broker. 

“The devil is going to be in the details,” he said. “It will have an impact. I just don’t think it’ll be a dramatic impact of driving prices down.”

If the model changes too drastically, Landry, McKee and Vitalius all said they fear the change could cause the industry harm as people either choose less expensive and less experienced agents, or forgo working with an agent altogether. This would result in fewer consumer protections, they said. 

Because the agent fees and commissions are rolled into the list price, there’s no additional check for buyers to write, and agents are paid at closing. That means prospective homebuyers may need to weigh the costs of paying upfront for a real estate agent or forgoing their services altogether.

“If the fee can’t be rolled into the loan and they have to write a check … the perception of value on the front end may not be there when it all seems easy,” at the beginning Vitalius said.

It may feel like they’re saving money, Landry said, but without a buyer’s agent serving as a qualified advocate as they work through a deal, “there are a whole bunch of minefields.” 

Before the 1990s, buyer’s brokers were practically unheard of. Real estate agents almost exclusively represented sellers.

“Every side should have representation,” McKee said. “I think we’re moving backwards a bit.” 

Either way, he said he is ready to put the lawsuit in the rearview so the industry can focus on more pressing concerns: housing affordability and accessibility.

It’s still just a proposal, he said, but “we’re all pretty happy if we could get there and say, ‘Let’s be done with it.'” 

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