Sellers may not realize it, but the commissions they pay their real estate agents are split with the agents who bring the eventual buyer through the door. Even when that agent works solely on behalf of the buyer, they take a part of the selling agent’s fee. It’s an odd dynamic called “coupling.”

But depending on the outcome of three major lawsuits challenging commission structures in the real estate field, that could change -- for the better, according to one seasoned observer.

As Stephen Brobeck sees it, if the courts rule to require sellers to pay their agents and buyers to pay theirs -- in other words, uncouple the commission structure -- the fees agents charge will eventually decline. Not right away, perhaps, and maybe not by all that much. But Brobeck believes it will be enough to force “marginal” agents out of the business. Those agents’ clients would then gravitate to their more dominant colleagues, resulting in an increase in business that would more than make up for the somewhat lower commissions.

In the end, says Brobeck, consumers will be better off.

Brobeck has been on the real estate beat for a long time. In 1990, he was executive director of the Consumer Federation of America, a national organization of more than 250 state and local nonprofit consumer groups. In that role, he challenged the use of subagency: a practice in which all other agents are “subagents” of the listing agent.

Back then, the agent who drove prospects around from house to house was legally bound to pass along information that was disclosed to him or her, sometimes without telling the buyers. As a result of Brobeck’s work, at least in part, subagency was eventually abandoned -- replaced, unfortunately in some cases, by disclosures so nebulous as to be meaningless to most folks.

In 2019, Brobeck, who by then had stepped down as CEO of CFA to become a senior fellow with the group, shined a light on those terms, calling for states to rewrite disclosure laws so buyers and sellers can more easily determine for whom their agents work.

In that report, he found that states use more than 50 different terms to identify the roles agents can play in a transaction. For example, depending on the jurisdiction, a dual agent -- one who works for both the buyer and the seller, but has no fiduciary obligation to either -- might be known as a “limited consensual dual agent,” “dual representative,” “limited dual agent without assigned agency,” “standard dual representative,” “standard dual agent,” “dual-agency broker representing seller and buyer,” “broker representing both seller and buyer” or “multiple representative.”

Then last year, Brobeck wrote a report calling into question the use of ratings -- not just the ones found on agents’ websites, but also on listings aggregators like Yelp, Facebook or even realtor.com, the official listings service for the National Association of Realtors. Some ratings were paid for, he said, and some others were out-and-out fakes.

Now at age 76, Brobeck is at it again, this time with a critical look at how uncoupling would work. He admits that this change would require favorable rulings in cases brought in Illinois, Missouri and Massachusetts by some of the country’s largest and most successful class-action litigators. But these law firms “would not have brought these cases if they thought they stood little chance” of succeeding, he argues. And he notes that a federal judge in Illinois has already denied an NAR petition to dismiss a suit challenging structural “price-fixing,” making it “far more likely” that decoupling will eventually come to pass.

Here’s how Brobeck sees the results:

-- Lenders and investors in mortgages will work with agents to facilitate the transition. They will quickly accept the idea that each side of the sales transaction has its own representation and pays its own commission. Better yet, with affordability always a question mark, they will allow the buyer’s fee to be included in the loan amount, so there will be no extra out-of-pocket cost.

-- It could be “well over a year” for commission levels to start falling, and they may only fall to 2.5% or so. While there is no standard fee, the typical charge by listings agents these days is 6%, of which the agent landing the buyer takes half. So with decoupling, the buyer’s side would be just 0.5% lower.

-- Well-established agents will be “confident enough in their long-term success” to handle the revenue shortfall. But for marginal agents -- “perhaps as many as half of all licensees,” Brobeck ventures -- the pinch will be so great they will cease active practice.

-- Buyers and sellers who would have otherwise signed up with those now-inactive agents will gravitate toward more established professionals. “Overall,” Brobeck says, “clients will receive better customer service.”

-- Discount brokerages that offer only rudimentary services are likely to see increased business, though not by much. Most consumers want “effective personal service from a single agent,” so Brobeck thinks they will align themselves with “a professional who can guide and reassure them.”

-- “To a greater extent,” Brobeck concludes, “the industry will look like a profession, with well-established agents dealing with clients and their issues while delegating routine tasks to salaried administrative staff.”

One weekend last month, Ben Caballero happened by a block in Argyle, Texas, where four home builders had set up model homes. Both sides of the street were lined with cars.

Unfortunately, builders are so far behind in construction these days that anyone who signed a contract that weekend probably won’t be able to move into their new residences until late spring or early summer.

“Builders simply can’t build homes fast enough to meet the remarkable demand,” says Caballero, whose HomesUSA is the broker of record for dozens of builders in four of Texas’ biggest markets. And it’s not just happening in the Lone Star State, but everywhere.

Usually, sales and new home starts move almost in lockstep. But these are not normal times. In its latest poll, marketing and research firm Zonda found that 30% of builders reported taking “weeks longer” to start work. And 6% said they were “months” behind.

According to Robert Dietz, chief economist at the National Association of Home Builders, by the middle of last year, sales outpaced the start of construction by the largest gap ever. By October, that record-breaking gap had widened even further. And by November, the count of sold-but-not-yet-started houses was up 69% from a year earlier.

“The gap is unprecedented,” says Dietz. “There is no comparable period in the data going back to 1963.”

Although new home sales slipped at bit in November, they were still 21% higher than a year ago, as demand continued to be supported by low interest rates, a renewed consumer focus on the importance of home, and rising interest in lower-density markets like suburbs and exurbs. On net, sales were up 19.1% for the first 11 months of 2020.

But starts have failed to keep pace. The spread between sales and starts is even greater than Census Bureau figures indicate, Dietz says, because the government’s count includes custom houses and those built specifically for rent.

Dietz indicates some slowing in sales is necessary, and believes builders may be pulling back a tad on taking new contracts until they can catch up. “Builders don’t want to get too far out over their skis,” he said in December.

That leaves the inventory of completed-but-unsold houses extremely low. Nationwide, the NAHB counts just 43,000 finished, ready-to-occupy houses nationwide.

Some builders have stopped selling altogether because they can’t keep up. Others are still selling, but they are raising their prices “aggressively,” Caballero reports -- in some cases, in an effort to slow sales.

According to Tim Sullivan at Zonda, at least two-thirds of the 18,000 subdivisions his company tracks have hiked prices. In September, price increases were nearly universal (94%) among projects in markets like Indianapolis, Phoenix, Denver, Raleigh, Tampa and Orlando.

That figure fell back a bit in October, the latest month for which the statistic is available. And, said Sullivan last month, “Prices are still increasing, but at a decreasing rate.”

But higher prices haven’t stopped people from looking, if not buying. Indeed, according to Zonda’s data, traffic also is at record levels. Sullivan adds: “Wait lists are back!”

Taking more deals than they can handle isn’t the only thing slowing builders down, though. They continue to face a number of headwinds, not the least of which are a lack of skilled labor and a lack of developed building sites.

But one of their main bugaboos these days is government services, or the lack thereof. Because of the virus, many local jurisdictions are operating on skeleton staffs. Some have reduced operating hours or closed some offices altogether. That means there’s nobody around to approve plans and make on-site inspections, among the myriad other services builders require.

At the same time, builders are concerned about their inability to obtain the products they put into their houses. According to BMC, a major supplier of building materials, it’s taking only slightly longer for such key items as wallboard, lumber, siding and doors, but “extended periods” for roofing, engineered wood, vinyl windows and door locks.

Two-thirds of the builders queried by Zonda were worried about their inability to get some products in a timely manner, and 53% said obtaining important government services is a problem. On top of that, prices for softwood lumber, a key building product, jumped nearly 50% between April and August -- the largest four-month gain since 1949.

Just 40% of builders said labor was an issue. And although there was no mention of a scarcity of lots on which to build, Sullivan reports that nationwide, the supply of construction-ready sites is down 9% from a year ago, while prices are up 5.6%. “Many markets are significantly undersupplied,” he says. “Availability is going down.”

Meanwhile, another big question mark is beginning to surface: appraisals. Sales are so far ahead of closings that valuations are lagging.

Until a house is finished and the buyer takes ownership, that sale can’t be used to support an appraisal on a new sale. Consequently, the appraisal could come in too low to secure the financing the next buyer is seeking. The result: They’ll either have to put more money down or walk away from the house they’re hoping to purchase.

In a little-known civil action, the Consumer Financial Protection Bureau is investigating the real estate affiliate of Quicken Loans for illegal kickbacks.

Specifically, the consumer watchdog agency is wondering whether Rocket Homes Real Estate violated the Real Estate Settlement Procedures Act when it charged fees for referring Quicken’s mortgage clients to real estate agents. Under RESPA, it is illegal to collect money without providing “meaningful” services.

The CFPB’s investigation has gone largely unnoticed because it does not publicize such cases until a determination of guilt is made. And rightly so -- to announce an investigation without any such findings would cast an unnecessary cloud over innocent companies.

Quicken, one of the nation’s largest mortgage lenders, did not respond to a request for comment. But the company, which went public in early August under the name Rocket Companies, said in its IPO prospectus that it “intend(s) to cooperate fully with the CFPB in this investigation and (is) confident in the compliance processes that Rocket Homes has in place.”

The case was brought to my attention by Dmitry Shkipin of HomeOpenly.com, who has filed a complaint against Rocket Homes Real Estate with the Federal Trade Commission alleging not only violations of consumer protection laws and market allocation practices, but also antitrust laws.

Shkipin told me during a lengthy telephone interview that he believes his allegations are the basis for the CFPB probe. He has filed similar charges against Better Mortgage, Mellow Mortgage and LoanDepot, but because those companies are not publically owned entities, it is unknown whether they are also being investigated.

Shkipin contends that all of these lenders operate sham “paper brokerages” set up with only one thing in mind: to extract fees from realty agents -- fees consumers ultimately pay, often in exchange for poor service.

Shkipin came to me after my coverage of the damning Consumer Federation of America report in October that said that online referral agencies, which collect fees for referring buyers and sellers to local realty agents, are all but useless. In these pay-to-play schemes, CFA said, referral agencies often refer people to mostly inexperienced or hardly active agents who are unable to generate their own leads.

In most cases, CFA said that agents won’t negotiate their commissions because they have already given away a chunk to agents referring clients to them. And sometimes, people will receive less-than-full service because an agent won’t pocket a full commission.

But Shkipin contends some mortgage companies go further by skirting RESPA. They do so, he argues, because they fail to add anything of value to the transaction other than handing off a lead to realty agents. I have copies of all of his complaints, but since the Rocket Homes investigation is the only one that is public, let’s stick to his allegations about that company.

His complaint says that while Rocket promises to match Quicken’s borrower clients with highly rated realty agents, it actually connects them with “only real estate agents (who) have agreed to pay a referral fee.” The fee is never disclosed to the client, according to Shkipin.

“In reality,” alleges Shkipin, “Rocket Homes is a broker-to-broker collusion scheme that utilizes its parent mortgage company’s consumer information and passes it along to a colluding broker, who is willing to pay for it with a cut of their commission. All partner agents agree to pay Rocket Homes a prearranged referral fee on all closed transactions through their employing broker.”

Under Section 8 of RESPA, referral payments are allowed only when all parties are acting in a brokerage capacity. But Shkipin maintains that Rocket does not meet that test. Instead of representing consumers to help buy and sell houses, the company “actively disengages” from those activities so that partner agents know Rocket will not compete with them for clients, he contends.

The company, which is rated No. 1 in consumer satisfaction by J.D. Power, uses its real estate license “to collect blanket referral fees from the largest number” of real estate agents possible, he alleges. It “has absolutely no duty of care to consumers and takes no responsibility for the transaction, despite receiving a direct financial benefit.”

Moreover, he maintains that in collecting blanket fees, Rocket violates the Sherman Antitrust Act, which requires agents and their brokers to compete for consumers without entering into agreements that restrain free trade. “It is a per-se violation when the parties agree to a ‘standard’ referral fee that will be paid for producing a client,” he says in his complaint.

Ironically, Shkipin’s company, HomeOpenly, is also a service that helps buyers and sellers find agents. But he says his operation is different in several respects. For one thing, it is an open marketplace, not a real estate brokerage, where all service providers listed on the network compete for consumers’ business individually. For another, it earns its keep from advertising, not referral fees.

He argues that companies like his operate at a competitive disadvantage so long as brokers can trade consumers as leads for blanket referral fees. As long as referral schemes are allowed to operate, he explains, agents are naturally encouraged to participate. There are no upfront costs, they pay only when a sale closes and sometimes hike their commissions to cover the referral fee they must pay.

“Any agent who chooses not to participate in such schemes risks losing ‘free’ business,” Shkipin says. “Such an environment is highly poisonous to a healthy real estate representation market.”