Home buyers and sellers are set to benefit from significant changes in how real-estate agents are paid following a $1.8 billion verdict against the National Association of Realtors and large residential brokerages. A federal jury in Missouri found that the defendants had artificially inflated commissions and conspired to require home sellers to pay the broker representing the buyer of their homes, thus violating federal antitrust law. This verdict, along with two other ongoing lawsuits, could potentially lead to a 30% reduction in the $100 billion annual real-estate commissions paid by Americans.
Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, stated in a research note that changes to the residential brokerage industry’s commission structure could eventually result in a decline of up to 30% in the annual commission pool. However, the appeal process by the National Association of Realtors is expected to be lengthy.
Mantill Williams, NAR’s vice president of communications, emphasized the organization’s commitment to consumers, market-driven pricing, and business competition. The organization plans to request a reduction in the verdict during the appeal process.
Anthony Lamacchia, owner of Lamacchia Realty, expressed his skepticism about the lack of material changes resulting from the verdict. He questioned the potential implications and timing of any changes that may occur. While the judge may require modifications to how brokerages operate, the ruling could also encourage real-estate brokerages to adopt new practices to avoid potential liability. Prior to the trial, RE/MAX and Anywhere Real Estate, two of the four real estate broker franchisors involved in the case, agreed to settlements pending approval from the judge. The remaining two, Keller Williams Realty and HomeServices of America, are planning to appeal.
The ruling could also pave the way for new business models to challenge the traditional approach to agent payment. Numerous real-estate startups, including REX co-founded by ex-Goldman Sachs partner Jack Ryan, have attempted to disrupt the industry’s payment structure. Ryan sees this verdict as a catalyst for change, stating that it could finally break the monopoly held by established players.
Overall, the verdict against the National Association of Realtors and major residential brokerages has the potential to bring about significant changes in the real-estate industry, benefiting home buyers and sellers alike.
