Using a travel agent to buy a plane ticket or a stockbroker to trade equities seem like relics of the past. And yet, every day, people across America hire a real estate agent to help them sell a home. It’s one of the few industries that has been able to largely avoid the disruption that has helped consumers cut costs in the Internet age.
And that is largely because of the power of the National Association of Realtors, the largest professional organization in America and a significant lobbying group for the real estate industry.
But the verdict handed down in a Missouri court on Tuesday that found NAR and two brokerage firms, Homeservices of America and Keller Williams Realty, were liable for $1.8 billion in damages for conspiring to keep commissions artificially high, may mark the beginning of the end of how homes are bought and sold.
Two other firms initially named in the suits brought by home sellers – Re/Max and Anywhere Real estate, formerly known as Realogy, which is the parent company of Coldwell Banker, Century 21, Sotheby’s International Realty and Corcoran — settled out of court for a combined $140 million. As a term of the settlement, they each announced a commitment to make changes in their business practices — including not requiring agents to be members of NAR.
Bob Goldberg, Chief Executive Officer of the National Association of Realtors.
From National Association of Realtors
National Association of Realtors CEO steps down, days after the trade group was found liable for conspiracy to inflate rates
While state governments license real estate agents, NAR has an extensive code of ethics it expects members to adhere to.
NAR and the brokerages have vowed to appeal the verdict, which means real estate commissions aren’t going anywhere immediately.
NAR has been fighting off US antitrust officials and litigation for years regarding anti-competitive practices and this verdict is the association’s biggest setback yet.
This verdict is just from one of several lawsuits currently filed against NAR, which is also facing scrutiny from the US Department of Justice.
NAR has already faced a difficult year, setting aside the verdict and the troubled housing market.
On the commissions, NAR has said they will appeal the verdict and that the issue won’t be resolved for years.
“This matter is not close to being final as we will appeal the jury’s verdict,” said Mantill Williams, NAR vice president of communications. “In the interim, we will ask the court to reduce the damages awarded by the jury.”
“This is not the end,” said Darryl Frost, spokesperson for Keller Williams.
What was the case about?
The cornerstone of the plaintiff’s argument is that NAR is forcing homesellers to pay an inflated commission that is then split between their agent and the buyer’s agent. The homesellers argued commission sharing as a condition for access to the Multiple Listing Service was unfair and kept commissions artificially high.
Typically, when a home goes on the market for sale, the seller offers their broker a set commission. For decades, the commission has consistently been around 6% of the sale price, usually with a 3% split for the buyer’s and seller’s agent.
Close-up of for sale rider on real estate sign post in front yard of house
Grace Cary/Moment RF/Getty Images
Realtors found liable for $1.8 billion in damages in conspiracy to keep commissions high
In a competitive market, the homesellers argue, the cost of the buyer’s agent’s commission would be paid not by the seller, but by the buyer who received the service. The sellers said that the buyers should be able to negotiate the fee with their agent, and that the sellers should not be on the hook for paying it.
NAR and the other defendants argued in court that their commissions are always negotiable. They also said that the system of having the seller’s agent split the commission with the buyer’s agent allows buyers, who are already weighed down with expenses like a downpayment, closing costs, inspections and appraisals, to avoid the added expense of having to pay an agent as well.
Consumer advocates celebrated the verdict and hoped that plaintiffs would also receive their request for the judge to order changes to how commissions are structured in the industry.
While already large, the award could grow even more — to a total of $5 billion, depending on what the judge decides.
The jury clearly saw the industry had restricted price competition to a point where it could ensure nearly uniform 5%-6% commissions, said Stephen Brobeck, a senior fellow at the Consumer Federation of America. Jurors made their decision quickly, he said, deliberating for only a few hours.
“The extent of injunctive relief decided by the court will strongly influence whether a price competitive system develops that lowers consumer costs and increases quality of services,” Brobeck said. “We hope that the court will sever the ties between listing agent and buyer agent compensation, freeing sellers from the obligation and need to compensate buyer agents.”
Impact of commissions on buyers and sellers
Not much is expected to change in the near term with regard to how commissions are set, agents say.
The longer-term impact of the verdict may be that the pairing of buyer’s agent commission and seller’s agent commission will eventually be separated.
Analysts from Keefe, Bruyette & Woods, an investment banking firm, said in report released ahead of the verdict that the NAR litigation and related government action is likely to reshape the residential brokerage industry’s commission structure, by eliminating the buyer-broker commission rule, and eventually the practice of listing agents and sellers setting and paying buyer agent commissions.
Homes in Hercules, California, US, on Wednesday, Aug. 16, 2023.
David Paul Morris/Bloomberg/Getty Images
Mortgage rates drop for first time in seven weeks
And since the commission paid to an agent is typically baked into a home price, if they were reduced or were to become more negotiable, home prices could drop as well, they said.
“Short term nothing changes,” said Jen Davis, a Keller Williams agent with Holt Homes Group, in Springfield, Missouri. “Commissions have always been negotiable. That will continue to be the case.”
But there could be unintended consequences if changes come about, she said.
“There are buyers that aren’t going to know the steps to buy a home,” Davis said. “They have to pay for a down payment, closing costs, appraisals, inspections. If they also have to come up with money to pay for a buyer’s agent, some just won’t and they’ll get in over their heads or they won’t buy at all. Not having representation will make the market less inclusive.”
TORONTO – The Toronto Regional Real Estate Board says home sales in October surged as buyers continued moving off the sidelines amid lower interest rates.
The board said 6,658 homes changed hands last month in the Greater Toronto Area, up 44.4 per cent compared with 4,611 in the same month last year. Sales were up 14 per cent from September on a seasonally adjusted basis.
The average selling price was up 1.1 per cent compared with a year earlier at $1,135,215. The composite benchmark price, meant to represent the typical home, was down 3.3 per cent year-over-year.
“While we are still early in the Bank of Canada’s rate cutting cycle, it definitely does appear that an increasing number of buyers moved off the sidelines and back into the marketplace in October,” said TRREB president Jennifer Pearce in a news release.
“The positive affordability picture brought about by lower borrowing costs and relatively flat home prices prompted this improvement in market activity.”
The Bank of Canada has slashed its key interest rate four times since June, including a half-percentage point cut on Oct. 23. The rate now stands at 3.75 per cent, down from the high of five per cent that deterred many would-be buyers from the housing market.
New listings last month totalled 15,328, up 4.3 per cent from a year earlier.
In the City of Toronto, there were 2,509 sales last month, a 37.6 per cent jump from October 2023. Throughout the rest of the GTA, home sales rose 48.9 per cent to 4,149.
The sales uptick is encouraging, said Cameron Forbes, general manager and broker for Re/Max Realtron Realty Inc., who added the figures for October were stronger than he anticipated.
“I thought they’d be up for sure, but not necessarily that much,” said Forbes.
“Obviously, the 50 basis points was certainly a great move in the right direction. I just thought it would take more to get things going.”
He said it shows confidence in the market is returning faster than expected, especially among existing homeowners looking for a new property.
“The average consumer who’s employed and may have been able to get some increases in their wages over the last little bit to make up some ground with inflation, I think they’re confident, so they’re looking in the market.
“The conditions are nice because you’ve got a little more time, you’ve got more choice, you’ve got fewer other buyers to compete against.”
All property types saw more sales in October compared with a year ago throughout the GTA.
Townhouses led the surge with 56.8 per cent more sales, followed by detached homes at 46.6 per cent and semi-detached homes at 44 per cent. There were 33.4 per cent more condos that changed hands year-over-year.
“Market conditions did tighten in October, but there is still a lot of inventory and therefore choice for homebuyers,” said TRREB chief market analyst Jason Mercer.
“This choice will keep home price growth moderate over the next few months. However, as inventory is absorbed and home construction continues to lag population growth, selling price growth will accelerate, likely as we move through the spring of 2025.”
This report by The Canadian Press was first published Nov. 6, 2024.
HALIFAX – A village of tiny homes is set to open next month in a Halifax suburb, the latest project by the provincial government to address homelessness.
Located in Lower Sackville, N.S., the tiny home community will house up to 34 people when the first 26 units open Nov. 4.
Another 35 people are scheduled to move in when construction on another 29 units should be complete in December, under a partnership between the province, the Halifax Regional Municipality, United Way Halifax, The Shaw Group and Dexter Construction.
The province invested $9.4 million to build the village and will contribute $935,000 annually for operating costs.
Residents have been chosen from a list of people experiencing homelessness maintained by the Affordable Housing Association of Nova Scotia.
They will pay rent that is tied to their income for a unit that is fully furnished with a private bathroom, shower and a kitchen equipped with a cooktop, small fridge and microwave.
The Atlantic Community Shelters Society will also provide support to residents, ranging from counselling and mental health supports to employment and educational services.
This report by The Canadian Press was first published Oct. 24, 2024.
Housing affordability is a key issue in the provincial election campaign in British Columbia, particularly in major centres.
Here are some statistics about housing in B.C. from the Canada Mortgage and Housing Corporation’s 2024 Rental Market Report, issued in January, and the B.C. Real Estate Association’s August 2024 report.
Average residential home price in B.C.: $938,500
Average price in greater Vancouver (2024 year to date): $1,304,438
Average price in greater Victoria (2024 year to date): $979,103
Average price in the Okanagan (2024 year to date): $748,015
Average two-bedroom purpose-built rental in Vancouver: $2,181
Average two-bedroom purpose-built rental in Victoria: $1,839
Average two-bedroom purpose-built rental in Canada: $1,359
Rental vacancy rate in Vancouver: 0.9 per cent
How much more do new renters in Vancouver pay compared with renters who have occupied their home for at least a year: 27 per cent
This report by The Canadian Press was first published Oct. 17, 2024.
