In the US, a new court ruling against the National Association of Realtors (NAR) and several major agencies could radically alter property transactions – most notably impacting agents' fees.
An antitrust suit brought by nearly half a million Missouri home sellers charged the National Association of Realtors, a real estate industry trade group, and some residential agencies with conspiring to keep commissions for home sales artificially high.
On Tuesday, 31 October, a Missouri jury ruled in favour of the plaintiffs, determining that the NAR, alongside the networks Keller Williams and HomeServices of America were liable for $1.78 billion in damages.
At question was the practice in which a seller is required to pay the buyer's agent fees for the party who purchases their property. This is dictated by an NAR rule. The home sellers said the real estate networks collaborated with NAR to enforce what is called the “cooperative compensation rule”.
The NAR is the country's largest professional organisation with assets totalling over $1 billion. It also owns the US trademark to the word “REALTOR,” making a real estate agent's ability to operate largely contingent on membership to the organisation. It currently has over 1.5 million members.
Under the verdict issued this week, sellers would no longer be required to pay buyer's agent fees, and agents would be allowed to set their own commission rates, which could see them negotiating commissions down to attract clients. Many commentators say this change could dramatically change the property landscape across the country, particularly if lower commissions encourage more buyers into the market.
It's also possible that some buyers may increasingly choose not to use a buyer's agent to reduce the cost of purchase. With the cost essentially defaulting to the responsibility of the seller in property transactions across the country, going without representation in a property sale hasn't been something that buyers have generally considered in the United States.
The RE/MAX network as well as Anywhere Real Estate (formerly Realogy) were also named in the suit, but settled earlier in the proceedings.
According to the New York Times, RE/MAX settled for $55 million, while Anywhere Real Estate – whose subsidiaries include Coldwell Banker, Century 21 Real Estate and Sotheby's International Realty – paid $83.5 million.
A statement released by NAR described the case as “not even close to being final”, as the organisation intends to appeal the decision. Experts expect that the case will likely make its way to the US Supreme Court.
“We will appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing and advance business competition,” NAR president Tracy Kasper said in a statement.
*** Credit - Juliet Helmke via realestatebusiness.com.au ***