Strategies for Limiting the Impact of the Moehrl v. NAR Decision

On March 29th, 2023, a significant development occurred in the legal battle between the National Association of Realtors (NAR) and the plaintiffs in the case of Moehrl vs. the National Association of Realtors, et al. A federal judge ruled that the lawsuit could proceed as a class action, marking a crucial milestone in the litigation process. The plaintiffs are seeking $13 billion in damages, alleging that the defendants engaged in a conspiracy to force home sellers to pay inflated commissions to the brokers representing buyers, thus violating federal antitrust laws.

While the final outcome of this lawsuit remains uncertain, it is highly likely that the real estate industry will undergo substantial changes in its compensation structure for agents representing buyers. It is essential for real estate professionals to be prepared for potential modifications that may affect the party responsible for compensating each side of a transaction. These changes could include a complete prohibition on sellers contributing to the buyer agent's commission, the introduction of additional disclosure requirements, enhanced transparency in agent compensation, and other adjustments.

One potential scenario that could arise is the imposition of a prohibition on sellers offering a commission to the buyer's agent, shifting the responsibility of compensating the buyer's agent to the buyer themselves. Such a change, or a similar restructuring, would have far-reaching implications for the operations of real estate professionals. Traditionally, agents primarily represented sellers, with buyer agency emerging later. As a result, buyer agents often relied on the listing agent to negotiate their compensation.

The transformative nature of this restructuring necessitates a comprehensive reevaluation and adaptation of the roles and responsibilities of real estate professionals, potentially leading to a reshaping of the entire industry landscape. The elimination of seller-paid commissions would require buyer agents to establish direct compensation agreements with their clients, thereby altering the dynamics of their relationships and transactions. This shift would likely impact the incentives, strategies, and negotiations employed by agents on behalf of their buyers.

To effectively navigate the risks associated with this prospective shift, real estate professionals must demonstrate the value they bring to buyers in a purposeful manner. Merely facilitating property searches and waiting for client inquiries will no longer suffice. Instead, agents must embody the qualities of market experts, displaying proactive behavior, proficiency in negotiation skills, and other invaluable traits. This new paradigm demands a heightened level of expertise and dedication to differentiate oneself in the market and provide exceptional service to clients.

By embracing this approach, real estate professionals can establish themselves as trusted advisors, delivering immense value to buyers in an era where direct compensation becomes the norm. Through their market knowledge, proactive approach, and adept negotiation strategies, agents can position themselves as indispensable assets, mitigating the risks posed by potential changes and ensuring continued success in the evolving real estate landscape.

Another effective strategy for strategically navigating the potential changes resulting from this class action lawsuit is to shift focus towards listings. With historically low inventory levels, it is widely recognized that the agent who controls listings wields significant influence in the market. If a real estate professional's business has primarily revolved around working with buyers, now is an opportune time to reinvent themselves and diversify into seller representation.

When working with sellers, it is customary for them to expect to compensate their real estate advisor for their services. In contrast, buyers often believe that the seller covers the buy-side commission. By adopting a strategy focused on listings, agents can align with sellers' expectations while also opening new avenues for engagement with buyers. As less experienced agents struggle to demonstrate their value as buyer's agents, an increasing number of buyers may directly approach the listing agent.

In this scenario, the listing agent can then refer the buyer to an agent who excels in showcasing their value on the buy side and negotiating a reasonable commission fee. By positioning oneself as an agent who understands how to effectively demonstrate value to buyers and negotiate favorable terms, real estate professionals can capitalize on these opportunities.
Shifting the focus towards listings, accompanied by a robust demonstration of expertise and value as a buyer's agent, empowers real estate professionals to effectively navigate potential changes stemming from the class action lawsuit. This strategic adaptation is likely to increase opportunities with both buyers and sellers, ensuring continued success in an evolving real estate landscape.

Joe Bray is a regional vice president with Berkshire Hathaway HomeServices PenFed Realty. Prior to entering brokerage leadership, Joe managed and grew one of the most successful real estate teams in Maryland. In his current role, Joe's primary focus is agent development and growth.