The landmark Sitzer-Burnett case came to a conclusion in October 2023. It dictated what changes would be required in real estate transactions nationwide. More formally known as Sitzer-Burnett v. National Association of Realtors (NAR), this case has had an impact on how commissions are paid, buyer-agent relationships, and overall practices.
These resulting changes from the landmark case have been in place for a month—here’s what’s changed and how it impacts you.
Background on the Sitzer-Burnett Case
A central theme in the Sitzer-Burnett case alleged that NAR actively discouraged proper negotiation of commissions, often leading to consumers paying much more than they might’ve otherwise paid. The plaintiffs stated that the “norm” for commission structures—where sellers were expected to pay both their agent’s commission AND the buyer’s agent commission—put an undue financial burden and lack of options on both sellers and buyers.
The plaintiffs won the the case, with the court ruling that NAR’s practices were in violation of federal antitrust laws. The verdict required sweeping changes throughout multiple areas of the real estate industry.
What Changes Did Sitzer-Burnett Require?
On or before August 17th, 2024, all individuals and businesses that conduct real estate activities were legally required to make multiple changes:
- Buyer Agency Agreements: These agreements have existed for a long time, though they weren’t required in many areas prior to the ruling. Now, all buyers who work with an agent in any capacity (such as touring homes) must agree upon a payment structure with their agent and sign an agreement before any real estate activities occur.
- Transparency of Commission Rates: Since sellers typically paid both agents’ commission before the ruling, many buyers were unaware of how (or how much) their agent was paid. Though the sellers were technically paying commissions, that amount ultimately came out of the amount the buyer offered on the home. With the changes, buyers are able to be more informed and negotiate their payment more effectively.
- Uncoupling of Commissions: Prior to the lawsuit, the “norm” in real estate was that sellers offered commission to the buyer’s agent as well. While sellers were legally able to opt out of this, deviating from this practice often meant buyer agents would not show their home.
- Free and Fair Competition: Now that buyer agents have to agree upon a set rate before engaging in real estate activities, agents have more incentive to stand out by offering better rates and service. This means that buyers and sellers have more negotiating power on the whole.
- MLS Revamp: The Multiple Listing Service (MLS)—the most widely-used platform for real estate professions to search for and list homes—was also required to implement changes. MLS systems are no longer allowed to advertise a shared buyer agent commission.
What is Sitzer-Burnett’s Impact on the Real Estate Industry?
One month since the changes took effect, consumers and professionals are already beginning to adjust. Here are some of the changes that have started popping up:
- Commission Structure Changes: Since sellers are no longer expected to cover commission for both agents, negotiating power for consumers has gone up. Sellers save on costs by only paying their agent and are more aware of the options available to them. Since buyers are now widely expected to cover their agent’s fees, they are more hands-on in the negotiation process—and more likely to be discerning when choosing an agent to represent them.
- Healthy Competition Between Agents: With consumers becoming more educated and having more options, agents now have to work harder to stand out from the pack. By offering competitive rates and better service, agents give themselves a better chance at earning the trust of potential clients. This, in turn, has the potential to be hugely beneficial for buyers and sellers.
- Updated MLS Systems: Nationwide, MLS systems have implemented changes to stay in compliance with new regulations.
- Market Disruption: While many changes have already gone into effect, the implications of Sitzer-Burnett may be even more wide-reaching. As brokerages, agents, buyers, and sellers adapt to the new normal, new business models or approaches may emerge that could greatly benefit everyone involved.
So, What’s Next?
The Sitzer-Burnett case marks a crucial turning point in the real estate industry, bringing about a new landscape that benefits consumers, is more transparent, and allows for less rigid models. While adapting to this ruling, it’s important to stay up-to-date with the changing dynamics. For buyers and sellers, the enhanced transparency and competition will be a breath of fresh air going forward.
Trelora’s mission remains the same—to offer our clients top-notch service at a fair price. Similar to our selling model, we’re happy to offer buyers full service real estate for just 1% commission.
