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Real estate commissions are negotiable, no matter what any lawsuit says

(FINANCE) An anti-trust lawsuit against major players in the residential real estate industry sheds light on misinformation and misunderstandings about commissions – when you’re buying or selling a home, you’re in the driver’s seat. Negotiate!

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Minnesota home seller, Christopher Moehrl, has filed an class action anti-trust lawsuit [in April], alleging a “conspiracy” to price fix broker compensation in the 2.5-3% range, naming the National Association of Realtors (NAR), Realogy, HomeServices of America, RE/MAX, and Keller Williams (with more to be named, inevitably).

The complaint intimates that by requiring brokers to offer buyer broker compensation when listing a property on the MLS, fees are “fixed” and inflated, violating anti-trust laws. In short, they believe buyer’s agents shouldn’t be paid because buyers can find their home online now.

The class action suit claims that because the seller has to pay the buyer’s agent, commissions are inflated. The truth is that although it is NAR’s rule to require compensation, it could be as little as one cent, and Associations support all compensation models (flat-fee, discount, rebates, traditional 3% per side, and even higher on luxury listings).

Let’s take a look at some of the court documents directly:

8. Defendants’ conspiracy has kept buyer broker commissions in the 2.5 to 3.0 percent range for many years despite the diminishing role of buyer brokers.

This point continues to outline how buyers agents are essentially useless in an era where homebuyers have direct access to listings and can find their own home online. That claim is similar to claims made by anti-Realtor bloggers in the early 2000s, and is wildly uninformed. All agents, no matter which side they represent have a fiduciary duty to their client, negotiate on their behalf, and walk them through (and oversee) a complex financial process.

Beyond that, buyer’s agents are often the person that has to inform a buyer that their dream home they found on Zillow (or other sites that use non-MLS data) actually sold several days ago, or was not real to begin with.

They’re the individuals that have to not only be educated on real estate law and contracts, lending options and processes, but be experts in a certain geographical area and be informed of architectural styles, smart home features, green home features, and so on.

The indication that a buyers agent’s sole value is to pair a homebuyer with a home is ludicrous and objectively false.

17. In that sales transaction, Mr. Moehrl was represented by a RE/MAX franchisee, and the buyer was represented by a Keller Williams franchisee. As part of the sales transaction, Mr. Moehrl paid a total broker commission of six percent, and 2.7 percentage points of the six percentage points were paid to the buyer broker.

It is important to note that it is not illegal to buy or sell a home without representation. It happens every day across this nation. If there was a legal requirement to hire a real estate professional, this lawsuit might have merit. But there is not.

Further, the fact that the buyer broker was only given 2.7 percent indicates that Moehrl negotiated against the supposed 3.0 percent standard the lawsuit is so aggressively fighting against.

Obviously this home seller knew he could negotiate commissions.

Not only did the Plaintiff not have to hire a Realtor, he didn’t have to allow any negotiation of the compensation, given that the buyer side earned 2.7 percent, and his own Realtor earned 3.3 percent.

38. As required by the Buyer Broker Commission Rule, the seller broker makes a blanket, non-negotiable offer of a three percent commission to the buyer’s broker when it lists the home on the local MLS.

The Plaintiff’s attorneys have clearly not done any homework. Compensation is required, that is factual, but there are no bylaws that dictate the amount. It can be as little as one cent. Or as high as 100%, it is all negotiable. All of it.

63. For years, buyer broker commissions have remained steady at two-and-a-half to three percent in the areas in which the Covered MLSs operate despite both an increase in home prices (increasing the dollar amount of the commission) and the diminishing role of buyer brokers described above.

NAR does not track or store broker commission data, and while brokerages individually do, they don’t uniformly or openly share that information with any competing brokers. There is no conspiracy regarding commissions.

The responsibilities of a buyer broker have actually increased over time, not diminished. Ask a broker in 1980 if they had to be well versed in modern marketing, social media strategies, analytics, paperless contract technologies, know the privacy laws regarding the collection and dissemination of information online, and so forth.

To repeatedly argue that anything other than market conditions have determined commission levels is dead wrong. In fact, some would argue that commissions on both sides of the transaction should be higher (and therefore, some brokerages offer services at higher commission levels than 3%).

The takeaway is that all commissions in real estate are negotiable, it’s not a legal requirement to hire a real estate professional when buying or selling a home, and that buyer agent responsibilities and values have actually increased over time.

Anyone in America who doesn’t like a Realtor’s services offered at a specific commission level can negotiate or hire a different Realtor – there is no conspiracy here. This lawsuit has a variety of factually inaccurate statements regarding commissions, and is laughable.

This story was first published in April of 2019.

Lani is the Chief Operating Officer at The American Genius - she has co-authored a book, co-founded BASHH and Austin Digital Jobs, and is a seasoned business writer and editorialist with a penchant for the irreverent.

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1 Comment

1 Comment

  1. Kyle Kopytchak

    July 4, 2020 at 11:44 am

    Great article!

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DMCA and Twitch streaming, aka a mess of copyright

(BUSINESS NEWS) As live-streaming is booming in popularity, DMCA claims are becoming an existential problem for Twitch. And it’s streamers who bear the burden.

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Twitch streamer in front of gaming PC, likely to face DMCA claims.

Last month hundreds of content creators on the streaming platform Twitch received DMCA takedown notices from their host at the same time, telling them that content on their channel was potentially in violation of copyright law.

Twitch has since summed up the incident in their own words on their blog. Typically, DMCA notices are supposed to provide the recipient with information about their options for submitting a counter-claim or seeking retraction. But, as the post admits, “the only option provided [to streamers] was a mass deletion tool for [their] clips, [and] we only gave [them] three days notice to use this tool.”

If they didn’t, they would risk losing their channel (and in many cases, their full time income.)

The videos in question could span thousands of hours of content, which could not realistically be deleted in the time allowed.

 

No Title

So, what you’re saying is all potentially copywritten music clips/VODS on my channel have already been identified and deleted, so I don’t need to delete anything right now?I need clarification because I don’t have the time to go through 4 years of clips.

Twitch has pretty much looked the other way from the unlicensed use of music on its user channels throughout its history. That’s generated more than a little resentment from groups like the Recording Industry Association of America in the past, and as the site only continues to grow, a massive wave of pressure from the labels has forced the site’s hand

The music industry wants Twitch to arrange for their streamers to use audio under the terms that websites like YouTube use. That includes a diligent Content ID system.

But instead, Twitch has built an in-house solution to this whole mess: Soundtrack, which offers a “rights-cleared music” from “independent artists.”

A spokesperson from Twitch supplied this statement to The Verge: “The music from Soundtrack is put into live streams and does not end up in VODs, and therefore we and our partners agree that sync licenses are not needed for Soundtrack.”

(The music industry doesn’t see it that way though.)

Not only that, but streamers still have a lot of questions about the new expectations on the site. In one case, a streamer had to completely stop their feed because their video was picking up music from an unrelated source.

Someone can even be flagged for playing a game that uses copyrighted music on-stream. Even playing a Star Wars game that makes use of the movie’s copyrighted soundtrack is a risky move. (After all, nobody wants to take any chances with Disney’s infamously aggressive legal team.)

In their apology, they expressed a desire to explore “potential approaches to additional licenses,” but said that “the current constructs for licenses that the record labels have with other services […] make less sense for Twitch.”

Securing a given song’s licensing rights is a pretty implausible task for a young streamer, since major copyright holders don’t generally negotiate on small-scale terms. Twitch, on the other hand, has been owned by Amazon since 2014. Amazon just happens to already be one of the biggest copyright holders in the world, and obtaining the rights to the songs that are in high demand shouldn’t be a prohibitive issue for one of their companies.

But ultimately this debacle isn’t solely their fault. The DMCA is an old law— old enough to drink, even. The people who wrote it could not have possibly accounted for the rapidly expanding new media industry. Under pressures like these, something has to give.

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There, and back again? Working remotely now, and in a post-vaccine world

(BUSINESS NEWS) Working remotely is now a subject openly discussed in the business world, and is affecting every employee in organizations. Companies should adapt while remaining careful to avoid common pitfalls.

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Mother working remotely with a child jumping on the couch next to her working.

I’m not even sure it’s up for debate anymore – working remotely is not lowering productivity. Several employers (90%!) are saying this (perhaps surprised with the findings). There was a lot of concern and hand wringing about this in the first part of the 2020 decade, but the experiments have bore out data that largely suggests it’s a viable option.

Working remotely has not been without its issues. Communication remains a concern and always will be, whether that is with coworkers or management, parents have more to deal with, and virtual meetings carry their own set of logistics that we’re all still navigating. But productivity has – surprisingly – been upheld despite the massive shift.

So this brings us to the next problem on the horizon – what happens once the pandemic is over, specifically with regard to remote work? Will workers want to return to their offices (assuming they are still available)? Will it affect a company’s entire workforce, or will it be left up to individual employees to decide? Could a hybrid system work?

Hybrid can be horrible,” says Gitlab CEO and co-founder Sid Sijbrandij. Gitlab has functioned as a fully remote company since its inception, and now has over 1,300 employees across 66 countries. They have written an extensive book that covers their processes for maintaining this setup, which has seen an increase in downloads since the beginning of the pandemic.

Sujbrandij explains that, “If you try to do hybrid you will have an A team and a B team, those in the office and those deprived of information and career opportunities.” This will create a disconnection between both groups, and will ultimately result in a breakdown in communication between those who work remotely versus those reporting into the office. This can lead to a number of potentially damaging scenarios – favoritism, knowledge being hidden away and siloed, and creating unfounded myths about productivity and commitment.

In other words, companies – once given the opportunity to return to a centralized workspace – may fall into the incorrect assumption that there can be flexible rules that apply to everyone under the guise of personal preference. This is a great idea in theory, but sounds a lot like the time Jim tried to celebrate everyone’s birthday on the same day. The ultimate joke of the episode is that the plan fails spectacularly – there’s so much unforeseen logistics and opinions and requests that everyone ends up disappointed; Michael comes back and consoles a broken Jim, stating that he’d tried that before.

Prithwiraj Choudhury – a professor at Harvard Business School – weighs in with similar advice, stating that companies need to take this transition seriously, with the potential for several months or years to fully complete the process. A recent article he authored explores this idea, with a huge emphasis on the idea that we will not simply work from home, but from anywhere, embracing a future where employees will be able to choose to live in other cities, states, or countries.

He further elaborates that this will be a necessity to help attract and keep key talent, and that this should be one of the primary motivations. “You really need to be convinced of why you are embracing this model. … This is the way to attract and retain the best talent. There are real estate costs and other benefits, but those are secondary.”

One way to help this is to ensure that everyone is on board – that even the C suite executives need to work remotely, functioning as a “shining example” that emphatically and enthusiastically embrace knowledge sharing. They can utilize Slack channels (or other communication avenues), and pursuing all necessary methods to ensure access is evenly applied across the board and given to all employees.

As we turn into a new year where a vaccine might be available, there will come a time when companies must re-evaluate their approach to working remotely again, making sure to have protocol and process that is definitive.

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End of unemployment benefits spell disaster without plans to replace them

(BUSINESS NEWS) If Congress doesn’t agree on a stimulus extension, December 31st could be a massive “cliff” for millions of unemployed Americans

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Unemployment documents being handed to employer.

If you’re still employed, chances are you know someone who has been furloughed or laid off as a result of COVID-19. Unemployment benefits from the CARES Act have cushioned the economic fallout from the pandemic for millions of Americans who are currently jobless. As someone who was furloughed from my 9-5 at the beginning of quarantine, I was extremely relieved to discover that the government had a plan for myself and others in my shoes.

However, without an agreed upon plan from Congress, these benefits are set to expire at the end of the year. This inaction would make unemployed Americans exceedingly more vulnerable to poverty and eviction. So, what’s the deal Congress? Why are y’all dragging your feet?

Here’s what you have to know about the current state of things:

  • Since the end of July, when extra unemployment benefits (aka the “extra $600) expired, most unemployed people are only making about half of their wage
  • According to the Bureau of Labor Statistics, there are about two unemployed workers for every open job (yikes!)
  • Over 10 million people are collecting pandemic-related unemployment benefits in America – and another 345,000 filed new applications last week – this isn’t “getting better”
  • After December the federal ban on evictions will be lifted, meaning we will most likely see a massive spike in unhoused individuals and families

All of this is happening as the holiday season approaches and a third wave of COVID spikes across America. As it gets colder in many places, many businesses that made it through the first waves are expected to close and, subsequently, their workers are expected to be laid off.

Everything is coming to a head on December 31st. If Congress doesn’t get its act together and agree on what a pandemic relief extension needs to look like, the American people will undoubtedly experience a very dark and depressing winter and spring.

Jean Kimmel, an economics professor at Western Michigan University, states that: “A society that already was becoming increasingly unequal will just become even more unequal [without benefit extensions].” Because COVID-related unemployment disproportionately affected America’s gig and low-wage workers, as well as women and People of Color, the failure to extend benefits would only further exacerbate the economic inequality in our country, which isn’t good for anyone.

Let’s hope our politicians can put aside their differences for the sake of the general public. Fingers crossed.

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