O‘ahu Real Estate Maverick Challenges National Rule on Paying Buyers’ Agents

At issue is the National Association of Realtors position on how the commission for a buyer’s agent is paid, a rule that a federal jury in Missouri has already put in doubt.

The issue over who pays a homebuyer’s real estate agent – and how much – is far from settled, despite last week’s billion-dollar-plus verdict in the antitrust lawsuit against the National Association of Realtors and two large real estate franchisors, Keller Williams and HomeServices of America.

In Missouri, the federal jury in the class-action lawsuit known as Sitzer-Burnett returned a verdict on Oct. 31 for the plaintiffs – a group of home sellers challenging the traditional compensation model under which sellers pay an average of 2.5% of the proceeds from any home sales to the buyers’ agents. The plaintiffs were awarded more than $1.78 billion in damages, which could be tripled by the judge to $5.4 billion under antitrust law.

The plaintiffs’ attorneys immediately filed another lawsuit in Missouri against the NAR, and this time named seven more real estate companies, including Compass, Exp World Holdings and Redfin, which all do business in Hawai‘i.

O‘ahu Realtor Bryn Kaufman has been talking about the buyer-agent commission issue since at least 2019, when he wrote an opinion piece for the real estate website Inman. In the article, written after the first lawsuit was filed, he argued that buyer-agent commissions were held artificially high by the current compensation model.

While the commission for a buyer’s agent is technically negotiable, Kaufman, principal broker and creator of OahuRE.com, questions the rules governing the timing of any negotiations. He argues that sellers should be able to negotiate the buyer agent’s commission after an offer is received. While NAR rules say a buyer’s agent commission is negotiable at any point in the transaction, locally it requires both brokerages to agree to such a negotiation.

“I didn’t feel it was fair because I had sellers who wanted to negotiate the commission and I think that makes sense,” he says. “You get an offer, why shouldn’t you be able to negotiate everything on the offer except the buyer’s commission?”

He says he tells some of his clients that “if you want to negotiate the commission we’ll just put in a 1-cent commission – you can always negotiate upwards. If we put it in with a penny commission, that allows the seller to negotiate.”

Kaufman thinks the NAR’s preset commission rule could change as a result of the lawsuits, and that sellers won’t have to determine buyer-agent commissions before receiving offers for their homes or condominiums.

“You get an offer, the offer comes with a price, a commission (and) the seller gets to negotiate everything,” he says. “The other thing, and I don’t think it will happen unless the government gets involved, the homebuyer must pay their own agent. That would be the big change.”

Kaufman’s firm offers clients different services, including a flat rate of $3,500 to sellers for bare-bones representation, which includes posting on the MLS, handling contracts and transactions but no marketing or showings. He says he does not typically offer a flat rate to buyers because the current homebuying process doesn’t support buyers who shop for homes without agents in tow.

But it does happen. He cites a recent sale of a Kailua home for more than $2 million; the buyer found the home with no help from an agent and the seller paid the full 2.5% commission to Kaufman’s firm as the buyer’s representative.

“We rebated the buyer everything but $3,500 because they did the leg work,” he says.

Meanwhile, NAR says it plans to appeal the Sitzer-Burnett verdict.

“NAR rules prioritize consumers, support market-driven pricing and promote business competition,” NAR said in a statement. “This matter is not close to being final, as we will appeal the jury’s verdict.”

Two other large real estate companies – Anywhere and RE/MAX – last month reached settlements totaling $138.5 million in both the Sitzer-Burnett case and another pending case in Illinois known as Moehrl v. NAR, which has not yet gone to trial.