It's been almost a full year since a jury seated in a Kansas City courtroom rocked the real estate world with a verdict in a case known as "Sitzer Burnett".
After months of legal wrangling and massive financial settlements, the real estate landscape is about to change forever in just a few short weeks.
Here's what you need to know...
WHAT THE JURY DECIDED: Rightly or wrongly, the jury determined that requiring sellers to pay real estate commissions as a condition for having their property marketed in the MLS was a violation of the Sherman Antitrust Act.
WHAT'S CHANGING FOR BUYERS: For buyers, a lot is going to change. As a result of this verdict, buyers will now assume legal responsibility for compensating their agents. And before viewing ANY properties, it will be a mandatory requirement that buyers have a signed, valid agency agreement in place with a buyer's agent. If a buyer finds a place that checks all the boxes, the hope is the seller will agree to compensate the buyer's agent. If not, it's either "no deal" or the buyer will have to pay their agent directly, per their pre-negotiated agency agreement.
WHAT'S CHANGING FOR AGENTS: Listing agents will have to have deeper conversations with sellers about whether to offer compensation to buyer agents, and if so, how much. But the most uncomfortable aspect of this settlement is that many buyer agents will be forced to seek agency agreements, with pre-negotiated compensation terms, BEFORE touring any homes. There is potential for high pressure sales tactics from some agents intent on obtaining a signed agency agreement based on a 30 minute introductory meeting at Starbucks... as well as the potential for some buyers to try and "go it alone" in one of the most complex and important financial transactions. The potential for massive future litigation - think breach of contract, breach of fiduciary duties, conflict of interest, failure to disclose material defects, etc - will keep real estate attorneys busy for years to come.
Pending any last minute injunctions or renegotiated terms... the new rules take effect August 17.
I've written extensively about this verdict and its potential impacts throughout the year in several reports I have shared with past and current clients. I believe these new rules are likely to shrink the buyer pool in the short term and lead to greater liability for agents, brokerages and consumers, particularly buyers. If you have specific questions, please reach out to me directly and I will be happy to chat with you further about how to navigate these monumental changes.
