ZG - A Landmark Verdict Could Change How Much You Pay For Your Next House | Benzinga
A recent verdict could change the way buyers and sellers interact with the housing market.
A federal jury in Missouri ruled Tuesday that the National Association of Realtors and other major real estate companies were guilty of conspiring to keep commission rates high in the real estate industry.
With mortgage rates nearing 8% and the market almost at a standstill, the decision is causing a stir across the real estate sector. However, it could benefit consumers by lowering commission costs.
What Happened: For decades, sales commissions for several brokerage-led industries, including stockbrokers and travel agents, have come down extensively or hit zero due to technological disruption. Yet, sales commissions for the real estate market continue to float between 5% and 6% — a rate that the federal jury deemed artificially inflated.
High commissions for real estate agents affect consumers. After all, the price of those commissions is passed down to the final price of a house. Sales brokers' fees are typically divided with the buyer's brokers.
After a two-week trial, the NAR, along with HomeServices of America, and Keller Williams were charged with $1.78 billion in damages to home sellers, for collusion to artificially inflate commissions.
HomeServices of America is the largest real estate company in the U.S. by number of closed transactions and is a subsidiary of Warren Buffet's Berkshire Hathaway (NYSE:BRK).
Under the current system, which can be challenged depending on the trials' final outcome, sellers are forced to pay high commissions to buyer's brokers, although technology now allows buyers to do much of the searches themselves. The plaintiffs included claims from over 260,000 home sellers in Missouri, Kansas and Illinois, who ...