In a victory of common sense over the widely disliked National Association of Realtors, a jury found the NAR guilty of conspiracy and awarded $1.8 billion in damages. 
“For the first time in decades, the way realtors are compensated may now change. The question becomes how many more lawsuits this case will spark. All in a delicate time for the housing market.”
Redfin – 5 Minute Chart
Good News: The 6 Percent Fee for Selling a House About to Get Trashed
On October 23, I commented Good News: The 6 Percent Fee for Selling a House About to Get Trashed
An antitrust lawsuit against the National Association of Realtors (NAR) is underway. I expect the NAR to lose.
The NAR is about to get its ass kicked and it’s long overdue.
Here’s a humorous reply that I received.
This has been litigated before. I expect NAR to prevail. The plaintiff does not have a leg to stand on. Good luck as you will need it.
What a hoot.
Technology Competition is AliveI
If the Biden administration wanted to strike at monopolies the NAR would be a clear case.
Instead, Biden, Warren, AOC etc. are after the usual boogeymen like Amazon, Google, Facebook, Apple, and Microsoft who are all in competition with each other in various ways.
For discussion, please see Competition is Alive, Microsoft and Google Wage a Search Engine Battle Over AI
NAR to Shed 1 Million Members If Shared Commission Dropped
What’s Next?
The NAR will of course challenge the suit. Sure enough, here is the NAR’s Comment.
“This matter is not close to being final as NAR will appeal the jury’s verdict. It will likely be several years before this case is finally resolved. ”
I expect the NAR to lose. The NAR can move on from its illegal scheme or it can lose money fighting.
Existing-Home Sales
Existing-Home Sales Drop Another Two Percent to a 13-Year Low
Existing-home sales are down 37.5 percent in less than two years.
Home sales were 6.34 million in January of 2022 at a seasonally-adjusted annualized rate. They are now 3.96 million.
For discussion, please see Existing Home Sales Drop Another Two Percent to a 13-Year Low
This is a transaction crash and on top of it, the split commission just went away.
Hello Mortgage Broker Employees
Adding insult and injury to a dismal situation, a major broker tells employees, We Want Your $100,000 Signing Bonus Back
Good luck to Realtors and mortgage brokers in this environment. Many are going to be in deep trouble. The same applies to those over-leveraged in AirBNB rentals now stuck with 8 percent mortgages.
Having bought and sold a few homes and being a licensed realtor I can tell you the majority of deals are a no-brainer and require little effort to sell or buy.
The majority of agents are complete goofballs who have no idea what they are doing. The longevity of the average sales agent is very short due to more agents than available properties.
I am glad to see the commission structure challenged and do believe that a lot of the junk fees should go away. It has been this way for a long time and industry does need to be disrupted. Very much like the old mortgage industry – they keep it old and outdated to justify the high fees. Title searches, title fees etc…. Some are important to protect the transaction but lets be candid that the amount of work put it in is often short.
It is unfortunate when ignorant people make the rules. As outlandish as a 6% commission sounds, it is devided between the listing agent 2% the sales agent 2% and the broker 2%. Agents provide a very important service for sellers including advertising , house appraising, coordinating inspections, coordinating mortgage applications.,etc.. And then they have good years and bad years. This potential lawsuit will result in realtors requiring the reduction of asking prices. No realtor in their right mind would pay for expensive advertising unless they can price the home at very saleable price.
Sorry it’s a conflict of interest no matter how many ways it’s split.
I have never used an agent. Probably never will. Tough for folks who can’t do for themselves. If I can’t do for myself, I just won’t.
“I have never used an agent. Probably never will. Tough for folks who can’t do for themselves. If I can’t do for myself, I just won’t.”
It depends on the type property. High visibility lower end homes are relatively easy to sell by owner. Done it twice myself. Throw in time constraints, more private or unique listing, and throwing it up on Zillow is less effective. Plus Zillow has made it more difficult to find FSBOs, where you now need to hunt for the option that even lets you see them, something that used to be automatic. You need to get the most possible eyeballs on your property, and with out of state buyers, which is who my next sale will likely go to, that means getting buyer’s agents on board. Discount Realtors are too often terrible. I have watched one in our area repeatedly undersell what the market will bear, just to make her time commensurate with the commission received. You can lose way more money than you “save” that way.
How is what the Realtors do different than what a union does? In both cases, people come together, agree with each other and with another party on prices (wages/commissions). It’s not that they are independent businesses; after all, the actors who are striking are not employees.
Maybe the Realtors should change their name. International Brotherhood of Realtors sounds good to me.
I am not so sure about the appeal.
I do not know Missouri law.
But appeals in many states require
the appellant to post a bond equal
to the amount of the verdict.
The NAR does not have $1.8 billion
in cash to post a bond.
Their 2021 financial statement of the NAR
showed assets of $1.03 billion and liabilities
of $265 million. So that would be a net worth
of $765 million.
So who is going to post a bond to the court
to allow the appeal to go forward.
Technically based on the $1.8 billion verdict
the NAR has a negative net worth of about
$1 Billion.
They are more likely headed to the Bankruptcy
Court than the Court of Appeals.
Obviously plaintiff attorneys will work to settle
the verdict for less than $1.8 billion so they can
get paid.
But with the other states class actions teed up
and the Justice Department with an anti-trust
case in the waiting their is a high probability that
the NAR may have to be re-organized or liquidated
or plaintiffs take a much lower amount.
Real Estate Commissions will come down, much like stock trading commissions did. With all the competition now, it costs very little to trade stocks. Lots of no-trading-fee alternatives (though they will find other ways to make money from you). And with today’s technology, you can do it all in the palm of your hand from anywhere. Love it.
I remember starting out in ’08, using Scottrade’s “budget” brokerage for only $7/trade, with only $10K to start.
We have too many middlemen in the economy, lawyers, insurance, bankers, realtors…etc.
While we do need those services, they’ve become too necessitated by regulation, often becoming self-regulatory, even writing law.
I’m happy to see NAR got shredded for imposing unnecessary costs, I’d like to see a lot more of it across industries.
.
Without the middlemen you will end up with something that looks like a DUI detail picking up trash. I don’t think people understand what that looks like dealing with (for most) the biggest purchase of their life.
I have had great experiences with realtors. I can’t speak for all obviously but they deserved it on my end. I do agree though, not all realtors are equal. Some go above and beyond. Some do next to nothing.
WAY too many parasites Agree 100%
I have bought and/or sold houses in six different states while working as a manager in a company whose nickname was “I’ve Been Moved”. None of the realtors I used spent more than a dozen hours on our behalf, and each made thousands off us. It is a racket unlike any other. If this racket can be busted by the courts, great. I could tell many stories of incompetence or dishonesty in the real estate business. Let’s hope they clean up their act.
I looked at the 5 year price chart for Zillow. If there were no lawsuit brought against NAR, Zillow’s share price would STILL be heading lower. It’s price peaked in early 2021, and has traced out Waves A and B of a long term zig-zag. Zillow is in the middle of Wave C which is where many degrees of waves 3 occur. Big gaps down like today are characteristic of multiple degrees of 3 in Wave C. I see the price dropping below $26 within 6 months and eventually dropping into single digits. It’s already crashed 80% in 2.5 years, and the economy is on the cusp of a recession.
It’s a verdict against women, especially divorced women with sharp elbows.
I’ve never experienced a conflict of interest. I’m sure it happens but end of the day the buyer and seller have to do their own homework on value. I’m ok with the 3%. These realtors, the good ones anyway, do put in a lot of work with open houses, help staging, back and forth on terms. It’s not exactly the most glorious job. I wouldn’t want to do it.
But the auto, teacher, and teamster unions are still ok, right? And the federal government, of course? Why do they all get unions but the NAR does not?
Retire as the school superintendent @ $300,000 / year pension, THEN become a real estate agent.
Lots of greedy people in this world unfortunately
I can see the headlines now.
“Realtor Strike Paralyzes the County”
story continues on page 6: “the massive shortage in door-opening skills has been a boon for apprentice locksmiths who suddenly find themselves with more work than they can handle.”
I used Redfin to sell my last house. I tried to sell by owner but was unsuccesful. Redfin, I believe has a different compesation package . I don’t believe the agents are paid a commission. My total commision was about 4.5% and if you use Redfin to buy another home you get .5% more back. I didn’t use them to buy another, I bought new. Anyway I wonder why Zillow wouldn’t just replace agents for the most part as you can do your home shopping online. Most of this could be done without using an agent and having them for paperwork primarily. I would think total commisiions should be in the 1-2% range if the buyer is doing most of the leg work. I don’t understand the suit, I always thought the 6% fee was negtoiable.
I have never understood why a realtor should get such high compensation for something they do not own. If a buyer wants the help of a professional who does all the footwork, a fixed fee is easily negotiated. That will probably be the model in the future, similar to attorney fees. Generally, people have been conned that selling a house is too complicated to do oneself; that is total BS. The public became lazy.
I have sold several properties with the help of attorneys and the fees were very reasonable; a simple sign in the yard usually did the trick, and once I put ads in a California paper, I live in Colorado. It was pretty expensive, but I received numerous calls. The internet would be used now. It is not that hard, folks, especially with house prices today. You can afford a new overpriced pickup with the realtor’s savings. Think of it that way.
I sold my last house with a 4.5% commission after negotiation, but the one I bought had the old couple pay the full 6% ride. While commissions can be negotiated, my problem is the agency problem of the seller paying MY realtor if I’m the buyer. My realtor basically screwed me in several ways as she was more incentivized by that 3% than making me happy.
So I’m happy to hear this news. I was already planning to try some sort of buyers agent or something if I bought again, but maybe the model will change so I won’t have to.
I’ve often felt like realtors always work for the Buyer. It seems to me like they do this because if there is no Buyer, there is no sale. I understand it on paper. It’s not supposed to be that way. My mind is not made up on the issue but I’ve often felt like this.
The thing is, that the real estate commission is only one of a great many abuses that happen with the transference of a piece of property. There are dozens and dozens of different hands out all grabbing for some of the fat.
Ultimately, this is one major reason why real estate sales have simply collapsed in the past several years.
I am 73 years old, retired for 12 years on a nice pension. If finances had not been skewed beyond recognition for decades, then the sensible thing for me to do would be to sell my house and downsize my responsibilities. But because of the incredible warping of priorities by government interference with free markets, its actually in my best interest to NEVER sell any real estate and contrariwise, to continue acquiring more. And I’m sure Im not the only old fogey who has figured this out.
Being a landlord is work. Stocks and bonds are easier during retirement. I sold my 16 unit apartment house and never looked back.
Especially now that you can get risk free interest at 5% on government bonds it makes more sense than ever.
The interest rate suppression of the last couple decades forced way more people into being landlords because it was the only game in town. Now that rates are up, it makes less sense to be a landlord.
Something like 90% of properties sell at exactly 6%. Anyone have the actual number?
The split is two ways: 3% to buyer and seller agent.
The split creates a conflict of interest on top of other monopoly issues.
We sold our house in June and had to pay 2.5% to our realtor and 2.5% to the buyer’s realtor.
I don’t understand why anyone would use a realtor in todays market. There are more people that want to buy than sellers. We’re planning on selling next year and will be for sale by owner.
Yep! When I sold my first house, it was FISBO and it sold on the first day to the first person who looked at it. It saved her a fee and saved me a fee…a win, win. As a certified neurotic neat freak, the house was in perfect shape. When she has an inspection done the inspector jokingly said to me, “does anybody live here”. Why would I need a realtor?
“Something like 90% of properties sell at exactly 6%. Anyone have the actual number?”
It’s like any other contract with the rate being negotiable. It doesn’t surprise me that the number paying 6% is that high, because they don’t seem to know they have options. A good Realtor is worth every penny. Their primary job in this day and age is to get a contract written and to battle emotions from the buyer and seller to see the contract through to closing. Some Realtors are worth less than nothing. Astonishing to me how few prospective Realtors sellers interview. Interview 3, at a minimum. I have repeatedly sold properties for 20-25% more than some of the rejected agents have said I should list a property for. As with any life situation, be your own advocate and don’t abdicate responsibility to another.
I’ve always been able to negotiate 5% but maybe it’s because the home prices were substantially above average
Price wise or quality wise?
In reality, the more likely your house is to sell quickly (great location, updated etc), the less you should have to pay in fees since the house is basically selling itself.
Its only when putting lipstick on a pig that the agents should be commanding anything close to 5 or 6% because then they have to really work to sell it.
Most pay 6% with 3/3 split.
System incentivizes obtaining listing, talking seller into listing at 95% of fair market value (quick sale/little time invested), and wait for market to sell the property and collect the 3%. With Fed induced inflation, compensation increased 10% or more a couple years. Somewhat like personal injury lawyers, all competing for few big case with 33.3% to 50% contingency fee.
Changing rules of agent compensation will result in many fewer, busier, agents. No second cousins coming in at the last minute to grab 3%.
“The NAR can move on from its illegal scheme or it can lose money fighting”
This is an existential event for most of them, so they’ll go down fighting just like the French candle makers
Clearly, a no brainer ruling. The same should be applied to hedge funds and other alternative asset managers.
I do not get this. I have sold many properties over the years and I never paid 6% commission. Usually 5% or 4.5%.
Here in Australia the commission is 1 to 2% and the agents make a good living. What is so hard about selling a property?
Neal, 1%/2% for each side.
Australia doesn’t have buyers agents.
Just listing agents.
If that is the case, I imagine that buyers tend to get ripped off? How does the buyer know the “market prices”? Whether they are going up or down? What percentage of the asking price is typically being paid for a property? Not to mention advice on repairs, etc?
I’ve bought and sold property in USA and Australia.
In the USA my real estate agent double dipped was both the seller and buyers agent. Didn’t bother me.
In Australia, I walked into an open house after getting the 20k first buyers stipend from the Australian government ( I was an American citizen… go figure ).
I had 10 minutes to make the decision because there were 20 other people at the open house.
I would say buyers with no real estate experience get ripped off or make mistakes going against a seasoned agent….I probably did…but house has doubled in value…so shrugs….
Suckas born every minute!
Not sure everyone realizes how it works currently: the average listing commission is 6%. This is usually split 4 ways: 1)listing broker = 1.5% 2)listing agent = 1.5% 3)buying broker = 1.5%. 4) buying agent
The “splits” are often negotiated higher for higher producing agents.
Point is, the 6% usually feeds 4 different parties.
“Not sure everyone realizes how it works currently: the average listing commission is 6%. This is usually split 4 ways:”
Most buyers/sellers don’t care. 1 person, 2 people, 4 people, 1000 people… why would they care?
Their perspective, as it should be, is: (work done on their behalf) / (money out of their pocket)
The avg home price is approaching $500,000. 6% of 1/2 a million… no brokers or agents are consistently doing enough for their clients to justify $30,000 per home sale.
EXACTLY!!!
Nor should big builders like Pulte have nearly 40% gross margins. And, yes, I understand what gross margin represents. It’s not net profit, but it’s still at least 2x higher than it should be.
You’ve got nurses working shifts making $1,000 a shift. That’s bonkers!
You’ve got CEO’s making hundreds of millions of $$$ a year. Again, nutzo!
You’ve got SUVs marked up 30-40% over the cost to manufacturer.
You’ve got a stock market that 50% overvalued.
You’ve got home & car insurance rates exploding.
EVERYTHING is out of whack and the top 25% or so of earners aren’t feeling the effects of inflation like the bottom 75% are. But, JPowell doesn’t care about that.
What’s needed to restore price stability is a big old fashioned great recession 2.0.
But, JPowell is going to do EVERYTHING he can to keep that from happening. He’s OKAY with PCE inflation that’s 70% higher than what’s good for prices, and it’s increased over the last three months, leading him to take another rate increase pause. Idiot!
No, no, no! We’re done with raising rates, people! We don’t care if the last mile of inflation won’t be tamed this year or even possibly next year.
Who thinks gas prices are going to crater this winter, reducing inflation?
Who thinks federal spending is going to slow down next year? Or the next?
Like Mish has pointed out, you’ve got six markets where existing home prices are rising with 8% mortgages and the only things the gurus care about are inventory & changing zoning laws.
INFLATION IS SOLIDLY ENTRENCHED in our economy. Everyone is still getting away with significant price increases in services. Goods has slowed down, but services is still very hot.
How else is the Fed going to crush services inflation without pusing the FFR up to a level that skids us into a recession? I don’t see how else that happens.
TINA2FOMO
To your point, most individual agents are only getting 1/4 of commissions paid. And they have expenses on top of that. Potential changes in commission structure combined with the transaction crash is going to result in a lot of agents leaving the residential real estate field.
Agencies will need to re think their business model as most agencies only get 1/4 of commissions paid as well.
Still outrageous when housing prices are in excess of $600k.
And, why is the Fed slow poking raising rates to squash the last mile of inflation?
Because next year is an election year, and they know high inflation is better than a recession for re-electing a Democrat.
That’s the ticket!
We’re going to have high inflation AND a recession in 2024. Look at all the layoffs that aren’t being reported by MSM. The layoffs are increasing. https://www.dailyjobcuts.com/
Still WAY too much It’s licensed theft
Agreed. Looks like there’s at least one NAR member here on MishTalk that down voted you.