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.”
MONTREAL – Two Quebec real estate brokers are facing fines and years-long suspensions for submitting bogus offers on homes to drive up prices during the COVID-19 pandemic.
Christine Girouard has been suspended for 14 years and her business partner, Jonathan Dauphinais-Fortin, has been suspended for nine years after Quebec’s authority of real estate brokerage found they used fake bids to get buyers to raise their offers.
Girouard is a well-known broker who previously starred on a Quebec reality show that follows top real estate agents in the province.
She is facing a fine of $50,000, while Dauphinais-Fortin has been fined $10,000.
The two brokers were suspended in May 2023 after La Presse published an article about their practices.
One buyer ended up paying $40,000 more than his initial offer in 2022 after Girouard and Dauphinais-Fortin concocted a second bid on the house he wanted to buy.
This report by The Canadian Press was first published Sept. 11, 2024.
MONTREAL – The Quebec Professional Association of Real Estate Brokers says Montreal-area home sales rose 9.3 per cent in August compared with the same month last year, with levels slightly higher than the historical average for this time of year.
The association says home sales in the region totalled 2,991 for the month, up from 2,737 in August 2023.
The median price for all housing types was up year-over-year, led by a six per cent increase for the price of a plex at $763,000 last month.
The median price for a single-family home rose 5.2 per cent to $590,000 and the median price for a condominium rose 4.4 per cent to $407,100.
QPAREB market analysis director Charles Brant says the strength of the Montreal resale market contrasts with declines in many other Canadian cities struggling with higher levels of household debt, lower savings and diminishing purchasing power.
Active listings for August jumped 18 per cent compared with a year earlier to 17,200, while new listings rose 1.7 per cent to 4,840.
This report by The Canadian Press was first published Sept. 6, 2024.
In the quest to find cities where renters can enjoy the best of all worlds, a recent study analyzed 24 metrics across three key categories—Housing & Economy, Quality of Life, and Community. The study ranked the 100 largest cities in Canada to determine which ones offer the most to their renters.
Here are the top 10 cities that emerged as the best for renters in 2024:
St. John’s, NL
St. John’s, Newfoundland and Labrador, stand out as the top city for renters in Canada for 2024. Known for its vibrant cultural scene, stunning natural beauty, and welcoming community, St. John’s offers an exceptional quality of life. The city boasts affordable housing, a robust economy, and low unemployment rates, making it an attractive option for those seeking a balanced and enriching living experience. Its rich history, picturesque harbour, and dynamic arts scene further enhance its appeal, ensuring that renters can enjoy both comfort and excitement in this charming coastal city.
Sherbrooke, QC
Sherbrooke, Quebec, emerges as a leading city for renters in Canada for 2024, offering a blend of affordability and quality of life. Nestled in the heart of the Eastern Townships, Sherbrooke is known for its picturesque landscapes, vibrant cultural scene, and strong community spirit. The city provides affordable rental options, low living costs, and a thriving local economy, making it an ideal destination for those seeking both comfort and economic stability. With its rich history, numerous parks, and dynamic arts and education sectors, Sherbrooke presents an inviting environment for renters looking for a well-rounded lifestyle.
Québec City, QC
Québec City, the capital of Quebec, stands out as a premier destination for renters in Canada for 2024. Known for its rich history, stunning architecture, and vibrant cultural heritage, this city offers an exceptional quality of life. Renters benefit from affordable housing, excellent public services, and a robust economy. The city’s charming streets, historic sites, and diverse culinary scene provide a unique living experience. With top-notch education institutions, numerous parks, and a strong sense of community, Québec City is an ideal choice for those seeking a dynamic and fulfilling lifestyle.
Trois-Rivières, QC
Trois-Rivières, nestled between Montreal and Quebec City, emerges as a top choice for renters in Canada. This historic city, known for its picturesque riverside views and rich cultural scene, offers an appealing blend of affordability and quality of life. Renters in Trois-Rivières enjoy reasonable housing costs, a low unemployment rate, and a vibrant community atmosphere. The city’s well-preserved historic sites, bustling arts community, and excellent educational institutions make it an attractive destination for those seeking a balanced and enriching lifestyle.
Saguenay, QC
Saguenay, located in the stunning Saguenay–Lac-Saint-Jean region of Quebec, is a prime destination for renters seeking affordable living amidst breathtaking natural beauty. Known for its picturesque fjords and vibrant cultural scene, Saguenay offers residents a high quality of life with lower housing costs compared to major urban centers. The city boasts a strong sense of community, excellent recreational opportunities, and a growing economy. For those looking to combine affordability with a rich cultural and natural environment, Saguenay stands out as an ideal choice.
Granby, QC
Granby, nestled in the heart of Quebec’s Eastern Townships, offers renters a delightful blend of small-town charm and ample opportunities. Known for its beautiful parks, vibrant cultural scene, and family-friendly environment, Granby provides an exceptional quality of life. The city’s affordable housing market and strong sense of community make it an attractive option for those seeking a peaceful yet dynamic place to live. With its renowned zoo, bustling downtown, and numerous outdoor activities, Granby is a hidden gem that caters to a diverse range of lifestyles.
Fredericton, NB
Fredericton, the capital city of New Brunswick, offers renters a harmonious blend of historical charm and modern amenities. Known for its vibrant arts scene, beautiful riverfront, and welcoming community, Fredericton provides an excellent quality of life. The city boasts affordable housing options, scenic parks, and a strong educational presence with institutions like the University of New Brunswick. Its rich cultural heritage, coupled with a thriving local economy, makes Fredericton an attractive destination for those seeking a balanced and fulfilling lifestyle.
Saint John, NB
Saint John, New Brunswick’s largest city, is a coastal gem known for its stunning waterfront and rich heritage. Nestled on the Bay of Fundy, it offers renters an affordable cost of living with a unique blend of historic architecture and modern conveniences. The city’s vibrant uptown area is bustling with shops, restaurants, and cultural attractions, while its scenic parks and outdoor spaces provide ample opportunities for recreation. Saint John’s strong sense of community and economic growth make it an inviting place for those looking to enjoy both urban and natural beauty.
Saint-Hyacinthe, QC
Saint-Hyacinthe, located in the Montérégie region of Quebec, is a vibrant city known for its strong agricultural roots and innovative spirit. Often referred to as the “Agricultural Technopolis,” it is home to numerous research centers and educational institutions. Renters in Saint-Hyacinthe benefit from a high quality of life with access to excellent local amenities, including parks, cultural events, and a thriving local food scene. The city’s affordable housing and close-knit community atmosphere make it an attractive option for those seeking a balanced and enriching lifestyle.
Lévis, QC
Lévis, located on the southern shore of the St. Lawrence River across from Quebec City, offers a unique blend of historical charm and modern conveniences. Known for its picturesque views and well-preserved heritage sites, Lévis is a city where history meets contemporary living. Residents enjoy a high quality of life with excellent public services, green spaces, and cultural activities. The city’s affordable housing options and strong sense of community make it a desirable place for renters looking for both tranquility and easy access to urban amenities.
This category looked at factors such as average rent, housing costs, rental availability, and unemployment rates. Québec stood out with 10 cities ranking at the top, demonstrating strong economic stability and affordable housing options, which are critical for renters looking for cost-effective living conditions.
Québec again led the pack in this category, with five cities in the top 10. Ontario followed closely with three cities. British Columbia excelled in walkability, with four cities achieving the highest walk scores, while Caledon topped the list for its extensive green spaces. These factors contribute significantly to the overall quality of life, making these cities attractive for renters.
Victoria, BC, emerged as the leader in this category due to its rich array of restaurants, museums, and educational institutions, offering a vibrant community life. St. John’s, NL, and Vancouver, BC, also ranked highly. Québec City, QC, and Lévis, QC, scored the highest in life satisfaction, reflecting a strong sense of community and well-being. Additionally, Saskatoon, SK, and Oshawa, ON, were noted for having residents with lower stress levels.
For a comprehensive view of the rankings and detailed interactive visuals, you can visit the full study by Point2Homes.
While no city can provide a perfect living experience for every renter, the cities highlighted in this study come remarkably close by excelling in key areas such as housing affordability, quality of life, and community engagement. These findings offer valuable insights for renters seeking the best places to live in Canada in 2024.
