A lawsuit in the real estate industry may actually be good news for homebuyers. Axios A Missouri jury reported this week that it found the National Association of Realtors conspired with brokers to inflate home sales commissions. As a result of this judgment, the defendants “are required to pay $1.8 billion in damages.” The decision will be appealed, but “these rates will start to come down.” How low? “Seller's commissions could be zero.” And that could lower home prices.
“This is a decision that has the potential to rewrite the entire structure of the U.S. real estate industry.” new york times report. Under NAR rules, home sellers are required to pay a commission to the buyer's agent. As a result, sellers of $1 million homes could pay up to $60,000 in agent fees. However, if the judgment stands, “the seller will not have to pay the buyer's agent.”
The changes will be “seismic” for the real estate industry, writes Lance Lambert. cash register club, a news and research company that analyzes the housing market. And more lawsuits against the real estate industry are likely to follow. “The big unanswered question here is whether today was a small earthquake or the first tremors of a much larger earthquake.”
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“Hardly visible to buyers”
In the United States, home sales typically involve agents for both the buyer and seller. “The seller pays a commission to both parties,” Rachel Kurzius explained in the Washington Post. If a seller attempts to opt out of paying a buyer agent, the home will no longer be listed on multiple listing sites (MLS) such as Zillow and Redfin. And homes that can't be listed on Zillow are “almost invisible to potential buyers.” However, these same sites have made real estate information so accessible that most buyers no longer need an agent to find a home. “However, the fees have not changed to reflect that.”
One possible change to the system is that “buyers would still be paying their own agents, but could negotiate for sellers to cover those costs as part of the deal.” reported the Wall Street Journal. If the housing market is depressed, buyers can benefit by having sellers cover all costs. If the market is tight, sellers will have leverage to raise prices a bit more. One expert said this process “ensures market forces know the correlation between the services provided and the commissions received by brokers.”
Some observers believe any changes will only have a marginal impact on home prices. Marketplace reported that “prices will remain high” due to the current tight housing supply. And this ruling could threaten the future of MLS websites and make the market a little less transparent than it currently is. “Buyers will need to use several different services to understand the overall market situation,” said Susan Wachter, a professor at the Wharton School of Business.
“You'll pay less”
In fact, Yahoo reported that Zillow's stock price fell 7% immediately after the Missouri ruling. Although the company does not rely directly on fee income, “its core business is selling marketing services to buyer agents,” he said.
Back in Missouri, there is still work to be done in the courtroom. The Associated Press reported that the core damages award of $1.8 billion has been “tripled” and the final fine for the defendants could be more than $5 billion. For most homebuyers, the significance of this case will be the change in the housing market. As housing prices soar, brokerage fees also rise, and as a result, sales prices also rise. “If sellers no longer had to pay buyer agents, there would be no inflation, buyers would be able to negotiate lower fees, and they would end up paying less,” said Stephen Brobeck of the Consumer Federation of America. Ta. A spokesperson for the estate agency said it could take some time for that to happen. “We plan to appeal the jury's verdict, so this matter is far from final.”
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