Why realtor commissions have been courting controversy
Commission fees typically amount to around 5-6% of a property’s selling price and are often divided equally between the buyer’s agent and the seller’s agent.
The plaintiffs in the Missouri class-action case argued that several NAR rules stifled competition among real estate brokers — including ones that effectively required sellers to make a non-negotiable commission offer to buyer agents before the property was added to a multiple listing service. Lawyers said this made it harder for buyers and sellers to negotiate and kept commission fees high.
The NAR maintained its practices were best for consumers. It plans to appeal the jury’s decision.
Redfin — which exited the association earlier this year — says the court ruling could cause both buyers and sellers to question the common practice of setting fees at around 5-6%.
“Traditional brokers will undoubtedly now train their agents to welcome conversations about fees,” Glenn Kelman, Redfin’s chief executive, said in a statement following the verdict. “Rather than saying that a fee for the buyers’ agent of 2% or 3% is customary or recommended, agents will say that a buyers’ agent fee, if one is offered at all, is entirely up to the seller.”
He added: “But it’s also possible that buyers will become the ones who decide how much to pay a buyer’s agent.”
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Explore better ratesWhat this means for the industry
The court decision — and others to follow — could have long-term implications for the future of America’s real estate industry. If plaintiffs continue to win lawsuits, the current system of split commission fees could change entirely, experts speculate.
If a buyer decides to hire an agent, it could be at a negotiated fee that is constrained in part because their compensation may no longer be baked into the listing price, Kelman said.
Some buyers might even skip working with an agent entirely and try searching for properties on their own to save money, Gross said.
Another issue is that many new agents start off their careers by working for buyers, Gavin Myers, managing partner at venture capital firm Prudence, which invests in tech companies involved in the real-estate sector, told CNBC.
Lower demand for buyer agents, or the possibility of lower commission fees, could deter folks from entering the industry entirely.
Those who are quick to adapt and pivot their business model may gain an edge in the future.
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