Real estate commissions have been at the center of a nationwide legal debate about how much agents should be paid in commissions and who is responsible for paying.
A federal jury finding in late October was among those that charged the National Association of Realtors, or NAR, and major real estate brokerages, with artificially inflating real estate agent commissions. But it isn’t the only case with the potential to shift the homebuying process.
At least two court cases currently being worked out, one of which is a class-action lawsuit that could net billions for members, could significantly upend long-standing industry practices, The Associated Press reported.
“Today, what effectively happens is the buyer agent’s commissions are added to the sale price of the house, inflating the sale price. If sellers no longer had to pay the buyer agents, there wouldn’t be that inflation and buyers could negotiate the commission down and they would end up paying less money,” Brobeck told The Associated Press.
Eldad Moraru, of Compass Realty in Maryland, said the region may initially see limited effects from this case, which is likely to continue for several years.
“We here locally have what’s called ‘buyer agency,’ where essentially, buyers have an agreement with a buyer agent to represent them. That does not necessarily exist in other parts of the country,” Moraru said.
Buyers in the area normally have to already have cash for these transactions because commissions are included in their home purchases, Moraru said.
But as these cases move forward, Moraru said the regulations that govern purchases could require more cash than expected.
“Especially first-time buyers, who have to save quite a bit of money to do that first transaction — this will be more cash that they will have to come up with, which you know, is going to create some hurdles and challenges for buyers,” Moraru said. “Hopefully in the future, there’ll be some regulations, maybe the lenders will change the current regulations to allow rolling that fee into the mortgage? Who knows.”
He also said these legal changes could create more trouble for new agents and those just entering real estate, but not necessarily experienced agents.
“I think it’s going to be a simple matter of buyer agents being able to articulate the value that they bring to their buyers. And I think once buyers understand that, they will understand the reason why paying a buyer agent to represent you is not only valuable but pretty critical and important in a market like hours,” Moraru said.
The class-action lawsuit that challenged the status quo for real estate agents across the nation was initially filed in 2019 on behalf of roughly 500,000 home sellers in and around Missouri. The jury finding stated that the National Association of Realtors and its co-defendants violated federal antitrust law by requiring home sellers to pay brokers who represent home buyers.
A 2020 complaint from the Department of Justice alleged that NAR’s enforcement and establishment of policies illegally restrained competitors. The settlement initially offered by the Justice Department was withdrawn in 2021, while a broader investigation of association rules and conduct was underway.
WTOP’s Mike Murillo and The Associated Press contributed to this report.