Escrow-no… The first of two class-action lawsuits targeting US realtors' dominance over broker fees got underway in Missouri yesterday. They represent a group of 260K+ Missouri, Illinois, and Kansas home sellers versus the National Association of Realtors (NAR), which backs the US housing market’s system for brokers sharing commissions. Typically, sellers must pay 5 to 6% of their home sales to fees split between buying and selling agents. Critics say it’s a conflict of interest because it gives buying agents little reason to negotiate lower prices.
Missouri says: The system is a “collusion” forcing people to pay billions worth of unnecessary fees. With the median new-home price at $416K, agent fees can top $20K/sale. Now Missouri sellers are seeking $4B in damages.
NAR says: It’s trying to prevent a “Wild West” of decentralized property listings. The outcome of the trial (and a similar one set to start in Illinois next year) could be pivotal in reshaping homebuying.
“Selling Sunset”-level tension…NAR's broker-fee system has long been criticized for driving up home prices and prioritizing agent listing prices, since higher sales mean more $$. With no legal cap, brokers can even raise fees when demand is high. Last year, the average US broker fee was about 5%, but in countries including Australia and the UK it stayed around 2%. Some companies are fed up: this month online brokerage Redfin left NAR, which requires a buyer’s agent fee on each listing.
Old foundations may need new structures… The lawsuits come as Americans face the least affordable housing market in nearly 40 years. The suits could help decide whether the Justice Department pursues an antitrust case against the NAR. Untying agent fees would be seismic — lowering commissions by as much as $30B/year.