.png)
In October 2023, a federal jury found the National Association of Realtors (NAR) and several large brokerages guilty of colluding to inflate real estate commissions. The jury awarded $1.8 billion in damages to plaintiffs who had been harmed by the NAR's conspiracy.
The other large brokerages that were found guilty of colluding to inflate real estate commissions in the NAR lawsuit are:
HomeServices of America
Keller Williams Realty
Re/Max
Anywhere Realty
These brokerages are all large national franchises with thousands of offices and agents across the country. They are among the most powerful and influential companies in the real estate industry.
Listen on YouTube
The NAR's conspiracy involved two main tactics.
First, the NAR pressured local MLSs to adopt rules that required brokers to offer a minimum commission to buyer's agents.
Second, the NAR and its members lobbied against government regulations that would have made it easier for consumers to negotiate commissions.
The NAR ruling is a significant victory for consumers. It means that consumers should have more negotiating power when it comes to real estate commissions. However, it is important to note that the NAR ruling does not prevent brokers from charging high commissions. It simply means that brokers can no longer collude to fix prices.
* Broker compensation in the U.S. has typically been about 5% to 6% of a home's sales price, with about half paid to a buyer's broker.
Home sellers complained that this model suppressed competition by keeping commissions for buyer brokers in the 2-1/2 to 3% range despite the brokers' diminishing role, with many buyers able to find homes independently online.
Sellers said the arrangement had "severe anticompetitive effects" and made "no economic sense, except for the buyer broker."
The defendants denied wrongdoing, with the NAR saying there was no evidence agents were required to "make offers of compensation at all, let alone at amounts that stabilize, fix, or raise commissions." *
Here is how I would explain the NAR ruling to you:
You know how when you go to the store, you can buy a candy bar for $1? Well, imagine that all the candy stores in town agreed that they would never sell candy bars for less than $1. That would be unfair to you, wouldn't it?
The NAR ruling is similar. The NAR is a big organization that represents real estate agents. The NAR used to have a rule that said that all real estate agents had to charge a certain amount of money in commission, which is a fee that they get paid when they help someone buy or sell a house.
The NAR ruling says that the NAR can't do that anymore. It says that real estate agents have to be able to compete with each other on price, and that they should be able to negotiate their commissions with their clients.
This is a good thing for you, because it means that you will have more bargaining power when you're buying or selling a house. You'll be able to negotiate a lower commission with your real estate agent, and you'll save money.
It's also a good thing for real estate agents, because it means that they will have to be more competitive. They'll have to offer better services and lower prices in order to attract and retain clients.
What Buyers and Sellers Can Do
As a buyer or seller, you can take the following steps to protect yourself in the wake of the NAR ruling:
Shop around and compare commission rates from different brokers.
Don't be afraid to negotiate with your broker for a lower commission rate.
Ask your broker about their commission splitting policy. This is the policy that determines how the commission is split between the buyer's agent and the seller's agent.
Be aware of the different types of real estate commissions. There are traditional commissions, flat fees, and hybrid fees. Choose the commission structure that is best for you and your situation.
How the Ruling Affects the Real Estate Industry Moving Forward
The NAR ruling is likely to have a significant impact on the real estate industry. It is likely that we will see more competition among brokers, as they compete for clients and negotiate commissions. We may also see more innovation in the real estate industry, as brokers look for new ways to attract and retain clients.
The NAR ruling is also likely to lead to more transparency in the real estate industry. Consumers will have more information about commissions and other fees, and they will be able to make more informed decisions about how they buy and sell their homes.
Overall, the NAR ruling is a positive development for consumers. It gives consumers more negotiating power and more transparency in the real estate market.
-My Home My Sale
References: https://www.reuters.com/legal/missouri-jury-hits-nar-real-estate-companies-with-18-bln-damages-2023-10-31/
Comments