By Jordan Yadoo and Leah Nylen | Bloomberg
The lucrative broker commission system in the US residential housing market is under intense antitrust scrutiny. The Justice Department and two private class-action lawsuits are challenging the National Association of Realtors (NAR), the influential lobbying group for the industry. The potential legal action could weaken the NAR and disrupt the real estate commission-sharing system that puts homesellers on the hook for a 5% to 6% cut of the sale.
This unique structure, controlled by the NAR through its control of multiple listing services, requires sellers to offer compensation to the buyer’s representative. Critics argue that this inflates home prices and amounts to “collusion.” The Justice Department has been investigating the industry, and the upcoming lawsuits could result in billions of dollars in damages.
The DOJ’s involvement could lead to significant changes in the commission-sharing system, including a possible ban on sharing commissions. This would have a major impact on the industry, potentially leaving many real estate agents unemployed. The Biden administration is particularly interested in addressing the issue as housing prices continue to rise, making housing less affordable for many Americans.
The NAR, which collects annual dues from over 1.5 million agents, is concerned about the potential consequences of the lawsuits and DOJ action. Any reforms that disrupt the current system could pose an “existential threat” to the organization.
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