Realtor Fees Were Meant To Fall. They Haven’t (yet)

More than a year after a historic legal settlement promised to deliver seismic shifts to commission structures, homebuyers and sellers are still waiting to see changes that impact their wallets.

ICYMI: A group of sellers accused the National Association of Realtors (NAR) of inflating home costs by letting buyer-side and seller-side agents discuss commission rates on the Multiple Listing Services (MLS) home database, which only agents can see. A jury agreed, so the NAR settled the lawsuit for $418 million in damages and barred agents from sharing commission rates on MLS databases—a huge change that was expected to extinguish the notoriously high 5% to 6% realtor fee in the US (global averages are 1% to 3%).

As a result…the US real estate industry braced for as much as a 30% drop in the estimated $100 billion Americans pay annually in commission fees. But the new rules have been a dud firecracker since taking effect in August:

• “It only took a matter of weeks really, for most agents to find a loophole,” one realtor told the New York Times, saying, “It’s almost a joke.” With commission discussions only banned from taking place on the NAR’s listing site, agents simply moved those conversations to phone, text, and email.
• Average commissions for buyers’ agents “barely budged” from Q3 to Q4, and ticked down less than 0.1% from a year earlier (e.g., $415 on a $415,000 home), per Redfin.
• Agents are pressuring sellers to continue offering 5% to 6% commission. Fifteen buyers and sellers told the NYT that they were boxed out when they tried to negotiate lower rates or go agentless.

There’s still hope: Housing experts predicted that commission declines would happen slowly, and progress may be getting held up by tight inventory. Buyers without agents have struggled to compete in high-demand areas, especially since listing agents tend to prefer working with represented buyers.—ML