Is this the death knell for broker fees? Justice Department weighs up unprecedented clampdown on Realtors pocketing up to 6% in commission
The Justice Department is reportedly considering legal action against the National Association of Realtors (NAR) as part of an unprecedented reduction in real estate agent fees.
The commission, which can be as much as 5 or 6 percent of a property’s value, is usually split down the middle between the two agents representing the buyer and seller.
On the average $407,100 home sale in the US, a 5.5 percent commission is about $22,390.
After a years-long investigation by federal antitrust enforcers, action is now underway, a person familiar with the matter said told Bloombergto examine the broker commission system.
The NAR is a trade association of real estate brokers and agents in the US. It has more than 1.5 million members, making it the largest professional organization in the country. and owns the trademark for the word ‘Realtor.’
The Justice Department is reportedly considering taking legal action against the National Association of Realtors. The photo shows the main Justice building, where the ministry has its headquarters in Washington DC
A study by credit firm Self Financial shows that this year the highest commission rates are in Ohio, Georgia and Missouri
The association controls many of the country’s many listing services — platforms used by real estate agents and brokers to share information about properties for sale and find listings for potential buyers.
To use the system, NAR requires brokers to be members of the organization. Sellers must also offer compensation to the buyer’s representative. Critics say this will inflate home prices.
A DOJ spokesperson declined to comment to DailyMail.com.
It comes after an investigation by a credit firm Financially myself found that this year the highest commission rates for real estate agents were in Ohio, Georgia and Missouri, with 5.81, 5.76 and 5.72 percent, respectively.
The reports of a possible antitrust lawsuit come amid two separate private class action lawsuits filed against the National Association of Realtors in Illinois and Missouri.
The latter began Monday and could result in as much as $4 billion in damages, according to the Bloomberg report. In the first case, individual plaintiffs will seek as much as $40 billion in a lawsuit set to take place next year.
The commission-sharing structure amounts to “conspiracy,” Michael Ketchmark, the attorney for the lead plaintiffs in the Missouri case, told me. Bloomberg. “The day of accountability is coming.”
The NAR has long been the target of DOJ investigations, starting with a case filed during the Trump administration.
To settle that, the association agreed to measures such as more price transparency, but the Biden administration later pulled out of that deal, claiming it wanted to retain the right to take further action against the NAR.
But a federal judge said earlier this year that the Justice Department is still bound by that agreement — a decision the department appealed.
According to a report the department filed in July, the federal agency planned to conduct an “investigation of conduct affecting more than $100 billion in brokerage fees paid annually by Americans.”
“The Department of Justice Antitrust Division makes this call to restore its authority to investigate potentially anticompetitive rules, policies, and practices of the National Association of Realtors,” the brief said.
“Because NAR rules govern most home sales across the country, they could have a significant economic impact on one of the most important transactions in the lives of many Americans.”
The NAR has long been the target of DOJ investigations, starting with a case filed during the Trump administration. The photo shows the former president arriving to address the National Association of Realtors during a 2019 legislative session
Redfin is an online real estate company that withdrew from the National Association of Realtors earlier this month over concerns about agent compensation.
“We paid more than $13 million in dues in an effort to influence NAR to advocate for an open, technology-driven marketplace that would benefit consumers,” the report said. release on October 2.
“We will now explore other ways to achieve those goals,” it added.
Redfin CEO Glenn Kelman told Bloomberg that the company supported potential action by the Justice Department.
In a worst-case scenario for the industry, the federal government could try to ban commission sharing, banning seller agents from compensating buyer agents.
“Our assessment is that the lawsuits in Missouri and Illinois will not reach that far, but it is possible,” he told the newspaper. “We think DOJ action is needed to get to that level, and that would be a huge change; in fact, half of the real estate agents in this country are said to be unemployed.’
DailyMail.com wrote to the National Association of Realtors for comment but did not immediately hear back.