Anti Trust

Real estate brokers pocketing 6% fees draw antitrust scrutiny: What does it mean for consumers?

Joe Wassweiler
November 8, 2023

The real estate industry is facing unprecedented antitrust scrutiny, as the Justice Department and two private class-action lawsuits investigate the lucrative broker commission system. The system typically puts homesellers on the hook for a 5% to 6% cut of the sale, split between their agent and the buyer's agent.

Critics argue that the system is anticompetitive and artificially inflates home prices. They point to the fact that the United States is one of the few countries in the world where home sellers are required to pay a commission to the buyer's agent.

The Justice Department's investigation is reportedly focused on the National Association of Realtors (NAR), the powerful trade group that represents over 1.5 million real estate agents. The NAR has been accused of colluding with its members to fix real estate commission rates.

The two private class-action lawsuits are also alleging that the NAR and its members have violated antitrust laws. One lawsuit is seeking billions of dollars in damages on behalf of home sellers who have been overcharged for real estate commissions.

The outcome of these investigations and lawsuits could have a significant impact on the real estate industry and on consumers. If the NAR and its members are found to have violated antitrust laws, they could be forced to change their practices, which could lead to lower real estate commissions for consumers.

What does this mean for consumers?

If the antitrust investigations and lawsuits are successful, consumers could benefit in a number of ways. First, real estate commissions could be lower. This would save home sellers thousands of dollars on the sale of their homes. Second, consumers could have more choices when it comes to hiring a real estate agent. Currently, the NAR requires its members to cooperate with other NAR members, which can limit consumers' choices. Third, consumers could have more information about real estate commissions and the services that real estate agents provide. This would help consumers to make more informed decisions about when and whether to hire a real estate agent.

It is important to note that the antitrust investigations and lawsuits are still ongoing, and it is too early to say what the ultimate outcome will be. However, the fact that the Justice Department and the courts are taking a closer look at the real estate industry is a positive sign for consumers.

What can consumers do now?

Even if the antitrust investigations and lawsuits are successful, it is likely that real estate commissions will remain a significant expense for home buyers and sellers. In the meantime, consumers can take a few steps to reduce the cost of real estate commissions:

  • Negotiate the commission rate with your real estate agent. While the NAR recommends a commission rate of 5% to 6%, there is no law that requires you to pay this rate.
  • Consider hiring a discount broker. Discount brokers typically charge a lower commission rate than traditional real estate agents.
  • Sell your home yourself. This can save you thousands of dollars in real estate commissions.

If you are considering buying or selling a home, it is important to do your research and to understand the costs involved. This includes understanding the different types of real estate agents and the commission rates that they charge.

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