The National Association of Realtors (NAR) and several major real estate brokerage firms are facing a series of lawsuits that could potentially disrupt the long-standing practice of home sellers covering the commissions of buyers’ agents. A recent class-action verdict in Missouri found that the NAR and its co-defendants violated antitrust laws by conspiring to inflate and maintain high sales commissions. Similar lawsuits have since been filed in other states. If successful, these legal actions could dismantle the NAR’s control over the real estate market and its ability to set and maintain commission rates between 5% and 6% of a home’s sale price.
The lawsuits primarily focus on the NAR’s rules that require sellers to pay commissions to buyers’ agents. The plaintiffs argue that this practice artificially drives up home prices and deprives sellers and buyers of profits. The recent Missouri verdict, which could result in damages of up to $5 billion against the NAR, has already prompted changes within the organization. The NAR has revised its participation agreement to remove the rule that mandated commission-sharing. However, critics argue that this change is merely superficial and does not address the underlying issues.
Real estate associations at the local level have also taken notice of the lawsuits. The Real Estate Board of New York and the California Realtors association have both made changes to how buyer’s agents are compensated. These changes aim to increase transparency and allow for direct negotiations between sellers and buyers’ agents.
The lawsuits could potentially lead to a complete ban on commission-sharing or reduced commissions. This could lower home prices, as commissions are currently factored into the listing prices. However, in the current supply-starved housing market, where demand is high and inventory is low, the impact on prices may be minimal. Some experts suggest that lenders may start offering financing options for real estate commissions, which could further complicate the situation.
Overall, the outcome of these lawsuits could have significant implications for the real estate market and the way commissions are handled. While it is uncertain how the cases will ultimately play out, they have already sparked changes within the industry and raised questions about the fairness of the current commission structure.
