Some analysts anticipate a $1.8 billion lawsuit verdict against the National Association of Realtors (NAR), triggering significant changes in the conventional real estate commission system. However, many active real estate agents wonder if the verdict will substantially impact buyers and sellers, attributing the underlying issue to a flawed system and a lack of consumer awareness.
A Missouri court in October issued the verdict, which determined that NAR colluded with brokerages to maintain artificially high commissions. Should the ruling be upheld on appeal, a key change expected is that sellers might no longer be obliged to cover the commission for the buyer’s agent, a prerequisite for listing a home on the MLS, the primary directory for home listings in the U.S.
Given that the typical real estate commission currently stands at around 6%, this alteration could potentially result in sellers saving approximately half of that percentage on their home sales. Consequently, this adjustment would bring the U.S. real estate commission structure closer to that of other countries, where the average commission is nearly 2%.
Despite the potential for sellers to save, many agents speculate that dismantling the commission system could yield unforeseen consequences or potentially no change at all. Some believe that buyers might negotiate lower prices, anticipating that they may need to cover their agent’s commission. Consequently, sellers might receive similar offers or even less than before.
In practice, sellers might find themselves in a predicament where they refuse to pay the buyer’s agent commission, risking losing potential buyers, particularly in a market that could swiftly shift from favoring sellers to favoring buyers.
Furthermore, agents are concerned that altering the commission structure might dissuade specific buyers from entering the market, particularly those unable to afford an additional 3% on top of the purchase price.
Opinions diverge regarding the impact on home prices. While some believe there could be a slight decline, others argue that in areas like the Bay Area with limited housing supply, any changes in commission payments are unlikely to significantly lower home prices.
Despite the potential for change, many agents anticipate that commissions will remain relatively stable or might undergo minor modifications rather than a complete overhaul. Ultimately, the complex nature of the U.S. housing market suggests that it will take more than alterations in commission structures to disrupt the status quo.
Sources: Associated Press 12/23
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