The age-old tradition of home sellers footing the bill for the commissions of their buyers’ real estate agents may soon become a thing of the past. A recent multibillion-dollar class-action verdict in Missouri found that the National Association of Realtors (NAR) and some of the largest real estate brokerage firms in the US violated antitrust laws by conspiring to inflate and keep sales commissions artificially high. This brings new lawsuits and older claims with similar allegations against NAR and other brokerages.
One of the attorneys representing plaintiffs in a recent case in South Carolina says, “The whole practice needs to stop. We just need to go back to being in a free market.” Many litigation cases have followed after a unanimous eight-member jury concluded that NAR and its broker co-defendants have caused home sellers $1.79 billion in damages since 2015. The Department of Justice has reportedly considered legal intervention to protect competition in the market.
NAR claims that their commission structure, which has been in place for over 100 years, benefits consumers, but the jury in Missouri disagreed. The verdict, if left uncontested, could increase damages to $5 billion against NAR and its co-defendants and potentially dismantle NAR’s stronghold over real estate commissions that have long been criticized for disadvantaging sellers and buyers.
In light of the ongoing legal actions, the NAR has revised its participation agreement to reduce mandatory buyer commissions to $0. However, many experts feel that this change may not be enough to solve the problem. Local real estate associations, such as the Real Estate Board of New York and the Realtors association in California, have also implemented changes on how commissions are negotiated and paid out.
According to experts and industry professionals, these lawsuits and potential policy changes could lead to more transparency in how commission rates are negotiated with sellers and listing agents and be presented in listing agreements. The impact on the housing market remains uncertain, but it could potentially lead to lower home prices and changes in how commissions are structured. The effects could also lead to shifts in how buyers and sellers negotiate payment terms and commission structures and influence housing affordability and financing in the future.