Are you a realtor? My condolences.
Not only have buyers/sellers decided to sit on the sidelines your commission rate is under attack. Have you considered a career in acting?
A Big Legal Defeat for the Realtors
A federal jury found the powerful lobby liable for conspiring to fix prices.
By The Editorial Board, WSJ
Oct. 31, 2023 6:34 pm ET
The National Association of Realtors has objected to our editorials challenging its anti-competitive business model, but what do you know. On Tuesday a federal jury found the Realtors liable under U.S. antitrust laws for conspiring to fix prices in the class-action case Burnett v. NAR.
Missouri home sellers challenged a Realtor rule requiring seller agents to provide a blanket offer of compensation to a buyer’s broker to list a home on the association’s affiliated multiple-listing service (MLS). These databases of homes for sale are similar to stock exchanges in that they match brokers and sellers. They are also de facto monopolies.
The plaintiffs provided compelling evidence that overall commissions have stayed at roughly 5% or 6% for decades, split evenly between the buyer and seller brokers. This is about two to three times as high as in other wealthy countries where such self-serving industry arrangements don’t exist. The inflated commissions are baked into home prices.
The Realtors told the court its rule saves buyers from paying brokers out of pocket, which some people can’t afford. But in other countries buyers rarely use brokers. Mortgage lenders and sellers’ agents handle negotiations, appraisals and closing. Buyers can generally figure out what to bid based on the closing sales prices of other homes in the area. Buyers could always employ and pay a broker if they want.
Some earlier lawsuits challenging Realtor rules were unsuccessful, but the association’s price-fixing collusion has become harder to defend as fees for stock brokers, travel agents and sundry other customers services have plunged amid technological disruption and competition. Why haven’t broker commissions fallen too?
The jury found the NAR and large brokerage firms liable for $1.8 billion in damages, which the judge could triple in addition to ordering the Realtors to scrap their anti-competitive rule. Two brokerage firms that were among the original defendants in the case previously settled claims for $138.5 million and agreed to policy changes.
Other firms will now have an incentive to do the same, especially before another federal case in Illinois challenging the same rule goes to trial. The Realtors plan to appeal the verdict and say it could be several years before the case is fully resolved. Perhaps, but Tuesday’s verdict is a victory for consumers that could change the way Americans buy and sell homes.