Court ruling could change the almost-fixed 6% commissions when a home changes hands

[Dan Druff]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

[tgull]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

No offense Druff, but your Jewness real screams out here. A realtor is a 100% commission gig. So the 3% they make on say a $400,000 home is peanuts. They have NO salary, no benefits. So the $12K they make in commission, they have to give 1% to their broker. Then after federal, state and local taxes their take home is like $5,000. Keep in mind they had to schlep around the buyer all over the place probably for weeks until they made a decision. Then hold their hand during the closing, IF they close. Many buyers flake out at the last minute or lose their loan.

You have to take the totality of the profession, yeah when you sell a house you look at the commission, and say what a rip off. Not understanding if you tried to sell it yourself you would have had massive headaches and probably developed another anxiety case. Think about how many douche bags they have to cater to for free in many cases that never buy. Come on Druff.

[NickyPipes]

Real Estate Agents are leeches, rats and weasels

One of the most overpaid and least deserving careers

It’s a lie to suggest real estate agents bring a lot to the table

The house is nice or not

Only value I can see is if they are very well connected to rich buyers

If a house sells for a million RE AGENT should get $10k

[desertrunner]

Druff- Good article and commentary, thanks.

[tgull]

Real Estate Agents are leeches, rats and weasels

One of the most overpaid and least deserving careers

It’s a lie to suggest real estate agents bring a lot to the table

The house is nice or not

Only value I can see is if they are very well connected to rich buyers

If a house sells for a million RE AGENT should get $10k

LOL says a 3rd world hustler. Real Estate agents are like waiters, they provide a service. You don't want to pay the tip don't go out to a restaurant. Same thing with using a realtor. I dunno, you just seem like a guy that never tips, in other words stiff the waiter.

[Jayjami]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

Horse shit. Obviously you’ve never worked on commission.

[BetCheckBet]

In Canada where houses routinely sell for close a million, they have a typical 5 percent rule. That being a lot more people have started to use online realtors that mainly just list your house and do the bare minimum for 1 percent.

Right now it’s sellers who fit the bill. And since prices have skyrocketed sellers don’t care about the hit to an already huge profit. However, once the market corrects don’t expect sellers to fork over so much to realtors when they are selling at a loss.

[garrett]

In Canada where houses routinely sell for close a million, they have a typical 5 percent rule. That being a lot more people have started to use online realtors that mainly just list your house and do the bare minimum for 1 percent.

Right now it’s sellers who fit the bill. And since prices have skyrocketed sellers don’t care about the hit to an already huge profit. However, once the market corrects don’t expect sellers to fork over so much to realtors when they are selling at a loss.

Free Market Capitalism

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[The Boz]

When I sold my last property in PA i negotiated a 5% commission. Not sure if that a state by state thing, but it’s definitely subject to negotiation.

And there is always the option of doing it yourself. I sold a condo in Florida myself recently and paid a title company to do the paperwork for me and the overall cost ended up less than 2%.

But yes, I agree with Druff the MLS non listing is BS.

[Texter]

Problem with Agents is they lie about their motivation.

They will say things like, “I get the highest price I can because it’s best for both of us” when really they want you to sell as quickly as possible for the bottom of your range.

Then they will brag about things not knowing it shows how shitty they are at their job.

They sold in 2 days at above list price! That’s how great I am as an agent!

Just means you priced the house too low and talked the seller into taking less than they really could get.

Freakonomics has studies to show how shady agents are.

When I sold my last house the commission was 4%…but I used the same agent when buying the next home

[Ryback_feed_me_more]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

Anybody know how some of these companies like 72Sold and others get around that because Im pretty sure that commission isnt as high with them and they do get on MLS I believe.

[Dan Druff]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

Horse shit. Obviously you’ve never worked on commission.

I agree for realtors the current commission model is better.

But that doesn't mean it's correct.

Typical commission jobs are different than selling real estate. It makes sense to use commission to incentivize employees to sell a product. Clearly the salesman will try much harder to make sales if he gets a piece of each one, rather than just paying him a flat salary regardless of sales performance.

However, real estate is different. Agents are not employees in most cases, but rather just independent contractors associated with brokers. More importantly, the residential real estate agent is selling something which belongs to individuals (a home), and is not trying to move product for a company. Clearly the agent should be paid for his/her work, but this is completely different from the usual commissioned sales model. The agent is instead just providing expertise in completing the transaction properly. It should be a service based upon the work required, with only a small increase for more expensive properties (only due to the potential legal liability the agent takes on).

As stated in the lawsuit, the biggest legal issue here is the apparent anti-competitive practices which have held the commission levels constant, and where agents are highly discouraged (or forbidden) from advertising cheaper commission. There needs to be a completely free market here, where agents are public about their commissions charged, and they compete for business. It is true that commissions are negotiable, but most people don't know this, and this is something discussed behind closed doors, and not advertised. The main brokers don't allow this, and the low commission agents (which again, only represent one side of the transaction) tend to be shit.

[Dan Druff]

For many decades, it has been an accepted practice for real estate agents to charge 6% commission of the final price in a home sale -- to be split evenly (3% each) between the buyer's realtor and the seller's realtor. That might change, as a huge court case in Missouri awarded $1.8 billion against the National Association of Realtors (NAR) and two brokerage firms, in what was alleged to be price-fixing and anti-competitive practices.

Any seller who refused to pay such commissions was not allowed to post on the Multiple Listing Service, where most homes for sale are found by prospective buyers. The court case claimed this locked buyers and sellers into the fixed 6% commission model.

The NAR argued that commissions are always negotiable, but still lost the case.

Here's a good writeup of the situation on CNN: https://www.cnn.com/2023/11/05/homes...fee/index.html



Interestingly, the one point not really raised in this whole thing is the biggest issue I have with the entire residential real estate commission model. Commission should NOT operate like tips in a restaurant. It should be a price based upon the service provided. There is no reason that a realtor selling a $2,000,000 house should make 10x the commission compared to the one selling a $200k house, as the work involved is very similar in both cases.

This really should operate in a free market fashion -- where realtors charge commissions based upon the demand for their services, and where it is mostly unrelated to the price of the property being sold.

However, this point was not really a part of the lawsuit, but instead focused on the anti-competitive practices.

It is true that you can negotiate with your realtor, sometimes reducing the commission to as low as 1.5%, but usually the other side doesn't bother, so 3% still comes off that side of the purchase price.

Anybody know how some of these companies like 72Sold and others get around that because Im pretty sure that commission isnt as high with them and they do get on MLS I believe.

See the last post I just made. There are low commission operations, but they have their own issues, as they deal in high volume, don't dedicate much time to each sale, and tend to like to underprice homes just to get them moved.

So it's a shitty choice. You either go with a crappy realtor, pay the mostly-fixed-3% commission of a good realtor, or attempt to go it alone and do a "for sale by owner".

[Dan Druff]

BUMP

New article on CNN about this: https://www.cnn.com/2023/11/15/opini...eck/index.html

It's all about the free market:

It is highly likely that these efforts will increasingly allow both buyers (and encourage sellers) to comparison shop for and negotiate commission rates. The Consumer Federation of America predicts that this competition would lower rates from 5% to 6% to an average of 3% to 4%, with much greater variation from agent to agent depending on agent competence and experience. This reduction would reduce commissions paid by an estimated $20 billion to $30 billion annually.

Any industry with almost zero pricing competition sucks.

The next target should be the healthcare industry. Doctors get compensated the same whether they're good or terrible, because they don't set the price -- the insurance companies do. And the shit doctors fill up anyway, in most cases, due to a general doctor shortage in the US.

[tigerpiper]

One of the plaintiff's lawyers is a friend of mine. He's been working on this case for 4 years. They already settled against two companies for more than $100 million, and this judgment could be 5 billion. Probably not collectable, but he's heading for a chunk of change.

Pretty big plaintiffs' team, but he's still looking at 10s of millions of dollars in fees. Nice.

Now he had to risk 4 years for potentially nothing, but getting those settlements funds a much bigger fight and appetite for risk against the big target.

Finally, this case represented a class of sellers in Missouri, Kansas and Illinois, only. The next day they filed for a nationwide class.

Not to mention copycats.

[Dan Druff]

Settlement has likely been reached:

https://www.usatoday.com/story/money...t/72985989007/



The biggest change is likely to be moving the commission for the buyer's realtor over to being the buyer's responsibility. Previously that 3% came from the seller.

This is expected to open up new competition for commission, as buyers often will want to shop the best deal. The seller can still offer to take both ends of it, but it will no longer be expected.

[tigerpiper]

My wife said he cut ahead of her in the drive through line at the pharmacy, and she gave him a death stare, then she saw who he was and smiled.

True story.

[tigerpiper]

The idea that this hurts buyers is dumb. A price is a price. It hurts the monopoly and the monopoly cries. Boo hoo

[donkdowndonedied]

Make some sort of sliding scale contract where the commission % goes up greatly above some baseline. I want to sell for 400k. Get a sellers agent. 1% + 10% for anything above $400k.

[tgull]

Settlement has likely been reached:

https://www.usatoday.com/story/money...t/72985989007/



The biggest change is likely to be moving the commission for the buyer's realtor over to being the buyer's responsibility. Previously that 3% came from the seller.

This is expected to open up new competition for commission, as buyers often will want to shop the best deal. The seller can still offer to take both ends of it, but it will no longer be expected.

The commission on selling a house is absurd. Yes, I get the fact everyone needs to earn a living. But to sell a $400,000 house for nearly $30,000 cost (7.5% when you include closing costs), is quite ridiculous.

Some of the dumbest and scammiest mutherfuckers are realtors. I actually got my realtor license years ago and never sold a house. I trained with a realtor on an open house in which 1 person showed up for a viewing. We just sat there for 5 hours and I know for a fact the 'training realtor' was rummaging through their medicine cabinet for pills because I could hear drawers opening. He also spilled his coffee on the couch and he flipped the cushion.

I went to talk to the broker Monday, asking him was it normal to sit around for 5 hours with ONE non-interested buyer to come in. I mean is not like you were getting a salary, you just wasted 5 hours of your time. He rummaged around his bookcase and gave me a DVD called something like Real Estate for Winners or something like that. He mumbled something like you have to make your own luck. He then said to make sure he got the DVD back, I left the DVD in the break room and never came back. Funny thing is I never got a call why I never came back. Just went back to my day job. LOL