A showdown over real estate fees could upend the market
The commission that U.S. home sellers typically pay to realtors is under fire, with the real estate industry accused of antitrust violations and extracting exorbitant fees.
Why it matters: Some legal experts predict that an antitrust lawsuit over brokers’ fees will reach the Supreme Court — and say the many challenges to the current system could upend the market and make it cheaper to sell a home.
How it works: The seller’s real estate agent typically charges a 5%-6% commission and shares it with the buyer’s agent.
Driving the news: Several powerful forces are going up against the National Association of Realtors and the rules governing home sales in various states:
Jack Ryan, founder and CEO of REX, is among those who argue that NAR’s commission system suppresses U.S. homeownership rates and reduces overall household wealth. “This is a great David-versus-Goliath story, both in terms of the odds but also in terms of the moral implications,” he said.
Of note: Realtors’ fees are a $100 billion-a-year business, per a 2019 Consumer Federation of America report. “These commissions — usually $15,000 to $18,000 on the sale of a $300,000 home — represent one of the most expensive products purchased by many consumers,” the report said.
Where it stands: The lawsuits in Missouri and Illinois — filed by prominent plaintiffs’ firms against NAR and an all-star cast of brokerages — are proceeding.
The National Association of Realtors — which has 1.4 million members — tells Axios it is confident it will prevail in the lawsuits and that the DOJ settlement largely just makes more transparent practices that were already in place.
What they’re saying: Traditional realtors say that people who use discount brokers can get burned by low levels of service and marketing.
Yes, but: People who support REX and its controversial CEO say that despite the crazy sellers’ market — with existing homes commanding record prices — Americans could extract more wealth from their homes and have greater mobility if realtors’ fees were lower and more competitive.
The bottom line: This is an issue we’re likely to hear a lot more about —especially under a Biden DOJ.
This content was originally published here.