Stoneworker
Footballguy
I've expressed in other threads that I'm not a fan of the residential real estate brokerage industry. Looks like some changes may be on their way. Source: WSJ 10/31/23
KANSAS CITY, Mo.—A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.
The verdict could lead to industrywide upheaval by changing decades-old rules that have helped lock in commission rates even as home prices have skyrocketed—which has allowed real-estate agents to collect ever-larger sums. It comes in the first of two antitrust lawsuits arguing that unlawful industry practices have left consumers unable to lower their costs even though internet-era innovations have allowed many buyers to find homes themselves online.
“It’s a wake-up call for real-estate agents,” said Sissy Lappin, owner of Lappin Properties, a real-estate brokerage in Houston. The verdict, she said, could change the industry, leading more buyers and sellers to forego hiring agents.
Under antitrust rules, the presiding judge could triple the damages verdict, which would total more than $5 billion. The plaintiffs also have asked the judge to order changes to how the industry operates.
Under the current system, sellers pay their own agent’s commission—typically 5% to 6% of a home’s selling price—which is in turn shared with the buyer’s agent. Over the course of the trial, plaintiffs’ attorneys argued this model has suppressed competition by making it difficult for buyers and sellers to negotiate for lower rates.
“NAR and corporate real-estate companies have had a stranglehold on real-estate commissions for too long,” plaintiffs’ lawyer Michael Ketchmark said outside the courtroom.
Commissions are typically baked into listing prices, so a broad decline in commission rates could slightly reduce home prices.
“It’s a great victory for consumers,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America. Under the current system, he said, “Sellers are overcharged, buyers are unable to negotiate commissions and as a result home costs are higher.”
In most markets, making an offer of compensation to a buyer’s agent is a condition for advertising a home on a multiple-listing service—a vital tool for marketing a home. NAR has said those commission offers are negotiable. Without the current structure, the group argued, buyers from more modest backgrounds would have to redirect funds away from their down payments toward paying an agent—or go without their own representation.
NAR is playing defense on a growing number of legal fronts. A much larger suit against the Realtors association and brokerages, involving 20 markets from Philadelphia to Miami, could go to trial next year in an Illinois federal court. The damages in that trial could top $40 billion, according to an analyst estimate.
Shortly after Tuesday’s verdict, the same plaintiffs’ lawyers in the Missouri case said they had filed a new nationwide lawsuit against NAR and other large brokerage companies, including Redfin and Compass.
Antitrust officials at the Justice Department also are closely following developments. They previously filed papers in both of the pending private cases to object to some of the claims made by NAR.
Tuesday’s verdict could have major financial ramifications for the defendants, including NAR. The association had net income of nearly $80 million and net assets of more than $760 million in 2021, according to an annual tax filing.
KANSAS CITY, Mo.—A federal jury on Tuesday found the National Association of Realtors and large residential brokerages liable for about $1.8 billion in damages after determining they conspired to keep commissions for home sales artificially high.
The verdict could lead to industrywide upheaval by changing decades-old rules that have helped lock in commission rates even as home prices have skyrocketed—which has allowed real-estate agents to collect ever-larger sums. It comes in the first of two antitrust lawsuits arguing that unlawful industry practices have left consumers unable to lower their costs even though internet-era innovations have allowed many buyers to find homes themselves online.
“It’s a wake-up call for real-estate agents,” said Sissy Lappin, owner of Lappin Properties, a real-estate brokerage in Houston. The verdict, she said, could change the industry, leading more buyers and sellers to forego hiring agents.
Under antitrust rules, the presiding judge could triple the damages verdict, which would total more than $5 billion. The plaintiffs also have asked the judge to order changes to how the industry operates.
Under the current system, sellers pay their own agent’s commission—typically 5% to 6% of a home’s selling price—which is in turn shared with the buyer’s agent. Over the course of the trial, plaintiffs’ attorneys argued this model has suppressed competition by making it difficult for buyers and sellers to negotiate for lower rates.
“NAR and corporate real-estate companies have had a stranglehold on real-estate commissions for too long,” plaintiffs’ lawyer Michael Ketchmark said outside the courtroom.
Commissions are typically baked into listing prices, so a broad decline in commission rates could slightly reduce home prices.
“It’s a great victory for consumers,” said Stephen Brobeck, a senior fellow at the Consumer Federation of America. Under the current system, he said, “Sellers are overcharged, buyers are unable to negotiate commissions and as a result home costs are higher.”
In most markets, making an offer of compensation to a buyer’s agent is a condition for advertising a home on a multiple-listing service—a vital tool for marketing a home. NAR has said those commission offers are negotiable. Without the current structure, the group argued, buyers from more modest backgrounds would have to redirect funds away from their down payments toward paying an agent—or go without their own representation.
NAR is playing defense on a growing number of legal fronts. A much larger suit against the Realtors association and brokerages, involving 20 markets from Philadelphia to Miami, could go to trial next year in an Illinois federal court. The damages in that trial could top $40 billion, according to an analyst estimate.
Shortly after Tuesday’s verdict, the same plaintiffs’ lawyers in the Missouri case said they had filed a new nationwide lawsuit against NAR and other large brokerage companies, including Redfin and Compass.
Antitrust officials at the Justice Department also are closely following developments. They previously filed papers in both of the pending private cases to object to some of the claims made by NAR.
Tuesday’s verdict could have major financial ramifications for the defendants, including NAR. The association had net income of nearly $80 million and net assets of more than $760 million in 2021, according to an annual tax filing.
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