America’s real estate industry is currently experiencing a major overhaul that could revolutionize the way homes are bought and sold for the foreseeable future. A Missouri jury recently found the National Association of Realtors (NAR) guilty of artificially inflating commissions through broker collusion, which could set a national precedent. Experts estimate that realtor commissions may be reduced by up to 30 percent as a result of the ruling.
While this may be good news for home sellers and buyers, it has raised concerns for the NAR’s 1.6 million members, many of whom are single parents, veterans, and young professionals. Some reports suggest that as many as 80 percent of these members may face unemployment. The real estate industry has become a popular side gig for Americans, especially during the pandemic, with a record 156,000 people becoming Realtors in 2020 and 2021.
Real estate agents in the US typically charge home sellers an average commission between 5 and 6 percent of the property’s sale price, which is more than double the average fees in the UK. This has led to a lawsuit in Missouri where the jury awarded $1.78 billion in damages to home sellers, and similar lawsuits are set to be brought in Illinois and South Carolina.
The NAR is the largest trade association in the US, and its members, called “Realtors,” have exclusive access to its database of properties for sale. This system has been criticized for driving home sales commissions higher and allowing buyer agents to steer their clients toward houses with higher commissions. A survey showed that 76 percent of real estate agents said buyer agents are more likely to show a property with higher commissions.
The recent ruling in Missouri has sparked a debate about the current real estate system, with some suggesting that real estate agent fees should be paid by buyers and sellers separately. However, this could pose difficulties for first-time homebuyers. While some believe that real estate agents should adapt to this new environment, others argue that the current system enables them to cover their expenses and provide comprehensive information to consumers.
In light of the Missouri ruling, the NAR has stated that they will appeal the verdict and seek to reduce the damages awarded. This ongoing controversy could significantly impact the future of the real estate industry in the United States.
