New Ruling Could Be the End of Realtor Commissions

A federal jury’s ruling will have a profound effect on the careers of the 1.6 million people who sell homes in the US. Per the Wall Street Journal, the National Association of Realtors (NAR) along with two brokerage groups must pay up after the verdict found them guilty of conspiring to keep home sale costs high by locking in commission rates, which are often split between buyers’ and sellers’ agents. CNN breaks down how the case was argued for the home sellers who brought the suit to court, which basically boils down to industry giants squashing competition by forcing a buyer-broker commission model. “NAR and corporate real-estate companies have had a stranglehold on real-estate commissions for too long,” said Michael Ketchmark, a lawyer for one of the plaintiffs.

While this is considered a win for consumers, the news comes at an already dire time in the housing market. Home sales have slowed to their lowest level in over a decade. NAR plans to appeal the decision, so changes to realtor compensation will not change just yet. But investment bank Keefe, Bruyette & Woods issued a report on likely scenarios, predicting that between 50%-80% of realtors could lose their jobs, while commission rates will most definitely be cut. One agent said that low commissions are “completely negating the reason to be an agent in the first place,” and she hopes to transition out of real estate within a year.

Agents’ commissions typically fall around 5% to 6% of a home’s sale price, earning them an average of $65,850 per year (luxury real estate series like Selling Sunset highlight a minority in the biz). Real estate agents are tied to almost all home purchases, driving 90% of sales in the US. One possible outcome after the ruling is for real estate agents to earn a flat fee. Changes in how they make money is welcome to some. “The thing I hate about being a buyer’s agent is they pull your string,” Las Vegas-based agent Bonnie Brunson told the Journal. “I’ve had clients I’ve worked with for a year or so and they end up not buying anything from me.” (Basic homeownership now runs you a third of your paycheck).

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