(NewsNation) — Recent class-action lawsuits filed against the largest brokers in the U.S. due to inflated commissions and collusion among agents are rattling the housing industry and could change how Americans buy homes.
The National Realtor Association (NAR) has settled paying nearly $2 billion in damages to Missouri homeowners in October 2023. The ruling came after a class-action lawsuit filed in 2019 on behalf of 500,000 home sellers, according to The Washington Post.
“That whole lawsuit is basically an attack on the American dream,” said Tommy Choi, an Illinois realtor.
Like other agents across the nation, Choi is reeling from the shock waves after a federal jury in Missouri found the NAR and other real estate organizations guilty of artificially inflating home sale commissions.
“The industry has colluded to set high uniform rates for many, many decades,” said Stephen Brobeck, senior fellow of the Consumer Federation of America. “The first significant challenge to the collusion are two class action lawsuits filed in Kansas City and Chicago courts.”
More class action lawsuits, including in New York and Illinois, are scheduled for this year, which could spawn big changes in the industry and loss of revenue for agents.
If commission rates were negotiable — for example, 4% instead of 5.6% or above — research shows sellers could have saved upwards of $72 billion in 2022.
“The rates are just too high. On the sale of a $500,000 house, that’s going to cost, in most parts of the country, $25,000 to $30,000 in fees — that’s essentially the price of a new car,” Brobeck said.
The argument revolves around set commissions, the fees paid by the sellers. The case attacks a standard requirement of around 6% commission.
Choi argues the system is not broken and the ruling will break it. Fees are calculated into the value of the home before a showing or a sale.
“I have to stand out compared to my competitors. So, the consumer ultimately has that choice to work with whoever they want based on maybe, sometimes it’s because someone’s going to offer a less of a professional fees and that’s what they’re focused on. Other times people see the value in someone’s resume their experience their skill, but that has not changed.
It’s common practice for agents to become a member of the NAR, but the plaintiffs argue members are part of a conspiracy to drive up home prices.
“I would not be surprised if early next year there is a global settlement. The industry is very eager to get this behind them,” Brobeck said.
Yet for realtors like Choi, this is all they’ve ever known.
“Right now, it’s an even level playing field where the market is set by what a buyer is willing to pay and the sellers are willing to agree to sell,” he said.
The NAR president Tracy Kasper, who had been in the role for a few months, resigned Monday after she received blackmail threats.
