PROVINCETOWN — A proposed settlement in antitrust lawsuits against the National Association of Realtors (NAR) grabbed headlines across the country in March and spurred speculation of a significant drop in home prices. On the Outer Cape, a lack of inventory all but guarantees that prices will stay high, but the settlement could mean slimmer margins for some of the 208 real estate agents who work here, according to state employment data.
On March 15, the NAR announced that the organization would pay $418 million to homeowners who alleged that it has engaged in anti-competitive business practices: buyers’ and sellers’ agents colluding to artificially inflate their commissions. Anyone who has sold a house in recent years could be eligible to receive some of the money, depending on the date of sale and the brokerage involved.
The settlement goes beyond the multi-million-dollar payout. The association also agreed to make changes that will fundamentally alter how agents work and are paid.
The NAR is the largest organization representing real estate agents and brokers with over 1.5 million dues-paying members. And it is powerful. Only NAR members can call themselves “Realtors” because the group trademarked the word in 1949. The NAR also controls many of the online portals, called multiple listing services (MLS), on which agents list properties for sale. Because the NAR controls the MLSs, which are integral to staying up to date in the market, the organization’s internal rules on how real estate agents are paid and how they can advertise their commissions have become standard industrywide.
If the court accepts the settlement, one of the most significant changes will be how buyers’ agents — the agents who show properties to people looking to buy a home — are paid.
The Shift for Buyers’ Agents
Currently, buyers’ agents do not have to enter a formal agreement with clients. Some do use contracts; others have worked more casually, showing houses to clients first and going into the details of how they will be paid later. Due to a NAR rule called “cooperative compensation,” the seller has traditionally paid a commission split between the buyer’s and seller’s agents after a sale closes.
Under the proposed new rule, buyers’ agents would have to spell out exactly what services the buyer will receive and the fee for those services before visiting any property.
This likely means that buyers will ask more questions about what exactly a real estate agent will do for them, which may favor agents who are well established in the local community.
“The idea of a part-time broker is going fast by the wayside,” said Nick Brown of Thomas D. Brown Real Estate Associates in Truro, who has been in the business for over four decades.
Chandler Crowell, a longtime agent at Berkshire Hathaway in Wellfleet, agreed. “I think it might make it less lucrative and harder to break into the industry,” he said.
“If you’re not prepared when a major shift happens, then that’s going to cause disruption,” said Colleen Barry, CEO of Gibson Sotheby’s International Realty, which operates 30 offices in eastern Massachusetts. She said her company has been preparing for the settlement for almost three years, instructing agents to improve their pitches to clients about the value of their services as a buyer’s agent.
The NAR has also agreed to enact a new rule that would prohibit listing agents from advertising the compensation that buyer’s agents would stand to gain from a deal on the online portals. In the lawsuits filed against the association, the plaintiffs alleged that the inclusion of commission rates on the MLSs resulted in “steering” — a practice in which buyer’s agents would direct their clients towards homes where they would receive a larger commission.
Ryan Castle, CEO of the Cape Cod and Islands Association of Realtors, told the Independent that Realtor services will still be critical to buying homes on Cape Cod.
“We think our policies have been pretty transparent and fair,” said Castle. “A real estate professional will get you more in the long run.”
Price Drop Resistance
Though there have been predictions that the changes in commission practices may lower prices, the housing market on Cape Cod appears unlikely to be substantially affected.
Barry of Gibson Sotheby’s put it this way: “Scarcity of inventory — that’s the ultimate chokehold on the marketplace. In all likelihood, if there’s someone out there who will pay it, that’s the level housing prices will remain at.”
According to NAR data, the average price of a single-family home in Provincetown has hovered around $2 million so far in 2024. In Truro, the price was $1.4 million, followed by Wellfleet and Eastham at around $900,000 each.
Doug Cliggott, an economist and lecturer at UMass Amherst, told the Independent that the effects of the NAR settlement on the mortgage market will not be known for some time.
“It’s not clear to me how much this decision will reduce commissions, and if commissions do go down, it is not clear how that would influence overall prices of houses and apartments,” said Cliggott. “Commissions are a very small factor in determining the price of housing — the costs of borrowing, of land, labor, and materials, and of developers’ profits are what determine housing costs.”
Alongside his academic understanding of the industry, Cliggott has a window on the day-to-day of agents’ work. His son, Max Cliggott-Perlt, also lives in Provincetown where he sells real estate with Robert Paul Properties.
The 6-Percent Myth
While experts are predicting that the NAR settlement will spell the end of the split 6-percent real estate commission on home sales, which has been standard in many parts of the country, real estate agents on the Outer Cape say that commissions here have always been lower.
Lee Ash, an agent at William Raveis in Provincetown, told the Independent that commissions, especially on the Outer Cape, fluctuate. “A lot of us chuckle a little bit because on the Outer Cape it’s very rare that we charge 6 percent,” said Ash. “I, and most good Realtors, tell their sellers that your commission is always flexible.”
“We have never operated at a full 6 percent for the last 25 years,” said Nick Brown. He estimated that on average, for properties that sold for under $1 million, agents would usually get about 5 percent. For properties over $1 million, commissions are usually closer to 4 percent, he said.
