Home buyers and sellers had a great week. Significant changes in how — and how much — they pay real estate agents became more likely after a $1.8 billion verdict Tuesday against the National Association of Realtors and major residential brokers.
The defendants artificially inflated commissions and “conspired to require home sellers to pay the real estate agent representing the purchaser of their homes, in violation of federal antitrust law,” a federal jury in Missouri found.
The lawsuit (and two others) could lead to a 30% reduction in the $100 billion Americans pay in real estate commissions each year, says Ryan Tomasello, real estate analyst at Keefe, Bruyette & Woods, in a research note. about the case, reported the Wall Street Journal.
“We believe that changes to the residential brokerage commission structure could result in the annual commission pool declining by more than 30% over time,” he said.
NAR will appeal, and that process could take years. In a statement to FortuneNAR vice president of communications Mantill Williams said the rules “prioritize consumers, support market-driven pricing and promote business competition.” The organization will ask the judge to reduce the sentence in the interim, he added.
Consequences for the housing market
But Anthony Lamacchia, whose brokerage Lamacchia Realty has more than 500 agents in several states, told the log: “I find it hard to believe that this could be the verdict and there are no material changes. It’s just what, and when, and where does it lead?”
The judge could demand changes in the way real estate agents operate, but whether that happens or not, the ruling could push real estate agents, fearing potential liability, to implement new practices. Before the trial, two of the four major real estate franchisors named in the case, RE/MAX and Anywhere Real Estate, agreed to settlements pending court approval.
The other two were Keller Williams Realty and HomeServices of America, a subsidiary of Berkshire Hathaway. A spokesperson for HomeServices, which plans to appeal, said in a statement: “Today’s decision means buyers will face even more obstacles in an already challenging property market, and sellers will find it more difficult to realize the value of their homes.”
Another consequence of the ruling could be that new business models finally break through. For years, real estate startups have tried to improve the way agents get paid, but they haven’t succeeded. Among them was REX, co-founded by ex-Goldman Sachs partner Jack Ryan.
“This will be a catalyst,” Ryan told the newspaper log“because no one could break the cartel.”