Did you hear that? It’s the sound of over a million real estate agents questioning their line of work.
What happened: Late last week, the U.S. National Association of Realtors settled an antitrust lawsuit alleging the trade group worked to artificially inflate sales commissions for years. Now, it will do away with its restrictive rules guaranteeing 6% commission for brokers.
What does that mean? While experts are unsure of the specifics of what comes next, almost all of them agree this will significantly lower the average sale price of U.S. homes.
- With a set 6% commission no longer guaranteed, realtors will fight to offer the most competitive (lowest) rates to attract customers, bringing overall listing prices down.
- Research from TD Cowen estimated that real estate commissions could fall between 25% and 50% under the new rules, which would shave thousands off home prices.
In Canada: A similar class-action lawsuit against the Canadian Real Estate Association and dozens of other local real estate boards and brokerages is working its way through the courts. It alleges that Canadian realtors have conspired to inflate commissions.
- The suit claims that there is an unwritten agreement called the “buyer brokerage commission rule,” in which agents for buyers and sellers evenly share commissions.
Why it matters: The U.S. ruling has spurred hope that the Canadian suit will be successful and that it will force real estate bodies to make changes, leading to more affordable housing.
Yes, but: Critics fear changes in the U.S. and potentially in Canada could disincentivize being a buyer agent, killing the profession and creating difficulties for prospective buyers.—QH