Realtors Lose a REALLY Big Lawsuit

Today I want to talk about a topic recently shared in the New York Times: “Home Sellers Win $1.8 Billion After Jury Finds Conspiracy Among Realtors.” To summarize the case: realtors are being accused of fixing the prices and unnecessarily passing costs onto the consumer.

Generally, in most real estate transactions, the sellers pay the Realtor commissions for both sides. All of a sudden, this is becoming a big issue even though it has been the business model for years.

People are saying that it is the end of the buyer’s agents because the sellers no longer have to pay the commission. But, news flash: the sellers never had to pay a specific amount. The only requirement was that the seller had to cooperate with a specific amount for the buyer’s agent, and it could be as low as a dollar!

The reason sellers are cooperating with larger commission payments is that they want buyer’s agents to bring the buyers to the house. Of course, you are going to cooperate because it brings potential buyers.

Buyer’s Agents Aren’t Going Away

Does this drive prices up? It’s hard to say whether a 2 – 3% commission to the buyers’ agent is really making a big difference. If the commission burden shifts away from sellers, it either means that buyers’ agents are going to be working for free. Or, buyers will need to add this commission onto all of the other costs they are juggling: down payment, closing costs, and more.

Buyer’s agents aren’t going to go away. No one is going think it’s a good idea for buyers to go in without representation and negotiate with a seller who has an agent.

The Details Don’t Add Up

The other confusing element of this case is that it doesn’t add up to be an anti-trust issue. There are so many brokerages out there, and they all have the option to charge as much as they want. These prices aren’t fixed.

The defendants in the case have said they are going to appeal the ruling. Time will tell what happens, but I’m sure it will be locked up in the legal system for years.

Things to Think About

In the meantime, there are some things to think about here. For example, there are low barriers of entry to becoming a real estate agent. Because of that, there are some agents out there who really don’t have the skillset they need to negotiate these large transactions. Do they really have the qualifications? I think the National Association of Realtors needs to evaluate this and determine better systems for training real estate agents.

To me, this news is something that will be interesting to see how it plays out. The way we do business at Franklin Loan Center is pretty aligned with the way it should be. Reach out any time if you have questions about financing or buying/selling a home.