After a $1.8 billion verdict, the clock is ticking on the 6% real estate commission| Latest Updates

Introduction

The recent verdict in a Missouri court found NAR and two brokerage firms, HomeServices of America and Keller Williams Realty, liable for $1.8 billion in damages for conspiring to keep commissions artificially high. The verdict may mark the beginning of the end of how homes are bought and sold, as the 6% real estate commission has been consistently around 6% of the sale price for decades, usually with a 3% split for the buyer’s and seller’s agent. The longer-term impact of the verdict may be that the pairing of buyer’s agent commission and seller’s agent commission will eventually be separated. The verdict could lead to a 30% reduction in the $100 billion that Americans pay each year in real estate commissions. The verdict could ultimately reduce agent commissions by 30%, saving sellers a bundle, according to analysts. The judge might require changes to how brokerages operate, but whether that happens or not, the ruling could spur real estate brokerages, fearful of potential liability, to implement new practices. The verdict could also break up NAR’s ability to charge exorbitant fees via antitrust.

However, NAR and the brokerages have vowed to appeal the verdict, which means real estate commissions aren’t going anywhere immediately. NAR has been fighting off US antitrust officials and litigation for years regarding anti-competitive practices, and this verdict is the association’s biggest setback yet. The award could grow even more — to a total of $5 billion, depending on what the judge decides.

The Verdict and Its Implications

  • The recent verdict against NAR and two brokerage firms for conspiring to keep commissions high could have significant implications for the real estate industry. Here are some of the key points:
  1. The verdict may mark the beginning of the end of how homes are bought and sold, as the 6% real estate commission has been consistently around 6% of the sale price for decades, usually with a 3% split for the buyer’s and seller’s agent.
  2. The verdict could lead to a 30% reduction in the $100 billion that Americans pay each year in real estate commissions.
  3. The pairing of buyer’s agent commission and seller’s agent commission will eventually be separated.
  4. The judge might require changes to how brokerages operate, but whether that happens or not, the ruling could spur real estate brokerages, fearful of potential liability, to implement new practices.
  5. The most impactful injunction would be one that bans cooperative compensation in the Multiple Listing Service on a national level, which the court has the authority to do.
  6. Changes to the payment structure for agents could cut the $100 billion annual commission pool for 1.6 million realtors by 30%, according to analysts.
  7. The verdict could break up NAR’s ability to charge exorbitant fees via antitrust.
  8. NAR and the brokerages have vowed to appeal the verdict, which means real estate commissions aren’t going anywhere immediately.
  9. NAR has been fighting off US antitrust officials and litigation for years regarding anti-competitive practices, and this verdict is the association’s biggest setback yet.
  10. The award could grow even more — to a total of $5 billion, depending on what the judge decides.

NAR and Brokerages’ Response

  1. NAR and the brokerages have vowed to appeal the verdict, which means real estate commissions aren’t going anywhere immediately.
  2. NAR has been fighting off US antitrust officials and litigation for years regarding anti-competitive practices, and this verdict is the association’s biggest setback yet.
  3. The award could grow even more — to a total of $5 billion, depending on what the judge decides.

Additional details on NAR and the brokerages’ response to the verdict:

a. NAR has said they will appeal the verdict and that the issue won’t be resolved for years. “This matter is not close to being final as we will appeal the jury’s verdict,” said Mantill Williams, NAR vice president of communications. “In the interim, we will ask the court to reduce the damages awarded by the jury.”

b. “This is not the end,” said Darryl Frost, spokesperson for Keller Williams.

c. The NAR and HomeServices said they plan to appeal Tuesday’s verdict, and Keller Williams is considering it. They also are preparing for a case, Moehrl v. NAR, that’s expected to reach a federal court in Chicago next year, with potential damages of about $41 billion.

  1. The verdict could break up NAR’s ability to charge exorbitant fees via antitrust.

Consumer Advocates Response

Consumer advocates celebrated the verdict against NAR and brokerages for conspiring to keep commissions high and hoped that plaintiffs would also receive their request for the judge to order changes to how commissions are structured in the industry.

  • The verdict could break up NAR’s ability to charge exorbitant fees via antitrust.

Additional details on consumer advocates’ response to the verdict:

  • The Consumer Federation of America, which has long criticized the real estate industry for its high commissions, said the verdict was a “huge win for consumers” and that it hoped the judge would order changes to how commissions are structured in the future. The verdict could lead to a 30% reduction in the $100 billion that Americans pay each year in real estate commissions, which would be a significant savings for home buyers and sellers. The verdict could also lead to more competition in the real estate industry, which could benefit consumers by lowering prices and improving service. The verdict could break up NAR’s ability to charge exorbitant fees via antitrust, which could lead to more transparency and fairness in the industry.

Conclusion

In summary, the recent verdict against NAR and brokerages, charged with maintaining high commissions, has the potential to reshape the real estate landscape. Key considerations include the possibility of a 30% reduction in the $100 billion annual commission expenditure, separating buyer’s and seller’s agent fees, potential changes imposed by the judge, motivating brokerages to adapt, and the likelihood of curbing NAR’s fee practices via antitrust measures. It’s crucial to note that NAR and brokerages plan to appeal, suggesting immediate commission changes may not be imminent. The outcome promises lasting effects on the industry and transaction practices.

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