Real-estate commissions could be cut 30% after verdict: Expert


Home buyers and sellers had a big week. Significant changes to how—and how much—they pay real-estate agents became more likely after a $1.8 billion verdict on Tuesday against the National Association of Realtors and large residential brokerages.

The defendants artificially inflated commissions and “conspired to require home sellers to pay the broker representing the buyer of their homes in violation of federal antitrust law,” a federal jury in Missouri found

The lawsuit (and two others) could lead to a 30% reduction in the $100 billion that Americans pay each year in real-estate commissions, said Ryan Tomasello, a real-estate industry analyst with Keefe, Bruyette & Woods, in a research note on the case, reported the Wall Street Journal.

“We believe changes to the residential brokerage industry’s commission structure could cause the annual commission pool to decline by upwards of 30% over time,” he said

NAR will appeal, and that process could take years. In a statement provided to Fortune, NAR vice president of communications, Mantill Williams, said its rules “prioritize consumers, support market-driven pricing and promote business competition.” The organization will ask the judge to reduce the verdict in the interim, he added.

Housing market implications

But Anthony Lamacchia, whose brokerage Lamacchia Realty has more than 500 agents in various states, told the Journal: “I have a hard time believing that this could be the verdict and there’s no material changes. It’s just what, and when, and what does it lead to?” 

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. Before the trial, two of the four big real estate broker franchisors named in the case, RE/MAX and Anywhere Real Estate, agreed to settlements, pending approval from the judge.

The other two were Keller Williams Realty and HomeServices of America, an affiliate of Berkshire Hathaway. A spokesperson for HomeServices, which plans to appeal, said in a statement: “Today’s decision means that buyers will face even more obstacles in an already challenging real estate market, and sellers will have a harder time realizing the value of their homes.” 

Another upshot of the ruling could be new business models finally breaking through. For years, real-estate startups have tried and failed to upend the way agents are paid. Among them was REX, cofounded by ex-Goldman Sachs partner Jack Ryan.

“This will be a catalyst,” Ryan told the Journal, “because no one could break the cartel.”


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