Amid an unforgiving housing market, an apparent win for beleaguered home sellers: A federal jury on Tuesday found the National Association of Realtors (NAR), along with real estate firms Keller Williams Realty and HomeServices of America, conspired to keep home commissions artificially high. They were ordered to pay nearly $1.8 billion in damages, a figure that could be tripled by the judge under antitrust rules—though NAR plans to appeal and it could be years before the case is finalized. The Washington Post reports that a NAR rule has forced home sellers to "make a nonnegotiable commission offer" prior to their property being put in the Multiple Listing Service, or MLS, which powers listings on major real-estate sites.
The commission falls between 5% and 6% of the sale price and is shared by the seller's agent and the buyer's agent. The Wall Street Journal boils down the crux of the argument per the nearly half a million Missouri home sellers who brought the suit: "This model has suppressed competition by making it difficult for buyers and sellers to negotiate for lower rates," jacking up homebuying costs in the process. The plaintiffs argued that if buyers paid their own agents, those agents would have to compete with each other by offering lower rates. The suit flagged countries like the UK and Australia where that's the case, and where total commissions don't typically exceed 3%.
Further, Axios reports the buyer's agent can typically see the percentage fee being offered; that figure is usually shielded from prospective buyers, leading the plaintiffs to argue that the rule effectively creates a conspiracy because agents can choose to direct clients to homes where the outcome will be financially advantageous for the agent. As plaintiff attorney Michael Ketchmark tells the Post, sellers who do not agree to the commission terms and are excluded from MLS "go virtually unseen in the market."
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Redfin, which left NAR a month ago partly because of the commissions policy, sees the verdict as a game-changer. "Traditional brokers will undoubtedly now train their agents to welcome conversations about fees," Redfin CEO Glenn Kelman said in a statement. "But it's also possible that buyers will become the ones who decide how much to pay a buyer's agent." The New York Times agrees, predicting the decision "could radically alter the homebuying process in the United States." The issue is far from settled: An even bigger suit against NAR on the issue could end up going to trial in Illinois in 2024, and the lawyers in the Missouri case filed another class-action suit naming NAR almost immediately after Tuesday's verdict; this one claims the current commission structure violates the Sherman Antitrust Act. (More National Association of Realtors stories.)
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