The Real Estate industry underwent a significant shift recently, as a Missouri jury ruled that the National Association of Realtors (NAR) had artificially raised commissions by enabling brokers to collude. As a result, the NAR may face a considerable reduction of up to 30 percent in commission fees, potentially altering the traditional buying and selling processes in America.
While this ruling is seen as a victory for home sellers and buyers, it poses a threat to the 1.6 million members of the NAR, including single mothers, veterans, aspiring professionals, and those who took up real estate as a side hustle during the pandemic. Experts estimate that as many as 80 percent of Realtors stand to lose their jobs as a consequence of the reduced fees.
Desirae Wykoff, a 36-year-old agent, expressed concerns about the unfair reputation that Realtors may face following the ruling, and she foresees many individuals leaving the profession. Wykoff, who became a Realtor in 2015, initially took up the role to supplement her income while her husband started a new business. However, after their divorce, she became a single mother-of-three and relied on real estate deals to supplement her full-time job at a local car dealership in Tulsa, Oklahoma, earning an additional $15,000 to $25,000 annually.
The Missouri jury’s ruling awarded home sellers in the state $1.78 billion in damages, with the plaintiffs also requesting changes to how the industry operates. Similar lawsuits are set to be heard in Illinois and South Carolina, potentially leading to a nationwide transformation of the real estate market.
The commission cut could reshape the dynamic of the industry, as the prevailing average commission charged in the US is between 5 to 6 percent, significantly higher than the UK’s average fees. Critics argue that the high commissions set by the NAR have enabled a system that drives buyer’s agents to favor properties with higher commissions, leaving sellers in a vulnerable position.
Responding to the ruling, Drake Johnson, a veteran and Realtor based in North Carolina, affirmed that sellers have the option to sell their homes without hiring a real estate agent. He mentioned that sellers can opt for cost-effective alternatives such as listing their houses for sale by owner on platforms like Zillow.
Industry insiders have suggested the ‘unbundling’ of buyer’s and seller’s agents, where they are paid separately by the buyer and seller, respectively. However, this approach may pose challenges, particularly for first-time homebuyers who may struggle to afford the additional fees.
Meanwhile, NAR spokesperson Wes Shaw indicated that the association plans to appeal the verdict, emphasizing NAR’s commitment to ensuring transparency and reliability in local MLS broker marketplaces. The real estate industry in America faces a significant transformation in the wake of these legal developments, which could potentially reshape the buying and selling processes as we know them.