This article discusses the potential for significant changes in the real estate industry due to a federal civil case in Kansas City, Mo., in which a jury found the National Association of Realtors (NAR) and major brokerages guilty of conspiring to keep commissions artificially high. The result of the case may cause the century-old cooperative commission system, in which sellers’ and buyers’ agents split a commission, to be broken up or change.
This outcome has real estate professionals and experts predicting major changes to the commission structure in the United States. While NAR and the other organizations named in the lawsuit have denied the allegations and plan to appeal the verdict, the potential changes have already affected Zillow’s stock prices and could eventually reduce the total amount U.S. consumers pay in real estate commissions, which is currently estimated at $100 billion.
Possible changes to the commission structure could impact both listing prices for homes and the services provided by buyers’ agents. The current system, established in 1913, has run virtually unchanged for decades, with sellers covering the high fees, resulting in higher listing prices and increased mortgage payments for buyers. In contrast, other countries, such as the United Kingdom, operate under a different commission structure, with sellers typically paying less than 2 percent and buyers paying their own agents.
This brings into question how a change in the commission structure in the U.S. would impact both buyers and sellers. Some experts speculate that there could be more transparency and education for consumers and a shift to an “a la carte” service model for buyers’ agents, while others express concerns about possible disadvantages that could affect liquidity-constrained buyers.
The changes could lead to a radical reorganization of the real estate industry, affecting everything from the commission structure, the services buyers’ agents provide, and the home prices. Amidst the uncertainty, many believe that the time is ripe for reflecting on the potential changes and preparing for the aftermath of this groundbreaking ruling.