How the REALTOR Commission Lawsuit Settlement is Changing Real Estate Commission Dispute Resolution

The recent REALTOR commission lawsuit settlement has sent shockwaves through the real estate industry, fundamentally altering how agents and clients resolve disputes. As of August 17, 2024, two major changes to real estate practices are poised to dramatically increase commission-related lawsuits. These changes include the removal of offers of buyer agent compensation from the Multiple Listing Service (MLS) nationwide and the mandated use of a Buyer Brokerage Agreement (BBA) when first working with clients.

Before these changes took effect, buyer's agents had a reliable mechanism to resolve commission disputes through the REALTOR commission arbitration process outlined in Article 17 of the REALTOR Code of Ethics. If a listing agent displayed an offer of compensation in the MLS and then refused to pay, a buyer’s agent could bring an arbitration request at their local REALTOR association. This arbitration process was not only faster but also less costly than traditional litigation, providing a streamlined path to resolve such disputes.

However, the landscape has shifted. With offers of compensation no longer displayed in the MLS, the option for arbitration under the REALTOR Code of Ethics is no longer available. This leaves buyer’s agents in a more precarious position, as they can no longer rely on the established arbitration process to resolve disputes over unpaid commissions. Instead, if an agent is not paid by their client—whether it be a buyer or seller—the dispute resolution mechanisms outlined in the Listing Agreement or BBA will now govern the process and will likely end in litigation.

This shift places a greater burden on the language and provisions within these agreements. Without the ability to rely on the REALTOR arbitration process, agents and clients must carefully consider how disputes will be resolved, which could mean resorting to traditional litigation—a time-consuming and costly alternative.

Given these changes, it’s more important than ever to ensure that your Listing Agreement or Buyer Brokerage Agreement is thoroughly reviewed and tailored to protect your interests. The standard forms provided by the local REALTOR association may not be sufficient to navigate the complexities introduced by the new regulations, potentially making the dispute resolution process more difficult than necessary.

At REB Law, our experienced real estate attorneys understand the intricacies of these new requirements and can help you craft agreements that safeguard your business and client relationships. We can review and customize your documents to ensure that they are clear, enforceable, and aligned with your best interests, minimizing the risk of disputes and potential litigation.

If you’re concerned about how the REALTOR commission lawsuit settlement will impact your ability to resolve disputes and get paid, contact the experts at REB Law today. We’re here to guide you through these changes, protect your interests, and help you navigate the evolving landscape of real estate transactions. Don’t leave your business exposed—let us help you prepare for the challenges ahead.