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The American housing market is undergoing a makeover.
The National Association of Realtors, a real estate trade group representing more than 1.5 million members, agreed this month to settle multiple antitrust lawsuits by paying $418 million in damages. As part of the settlement, the association also eliminated some long-standing rules regarding brokerage fees. This is a move that will transform the home buying and selling process.
For example, seller's agents can no longer offer to split commissions with buyer's agents on databases commonly used to list homes, but in a lawsuit home sellers say this practice is They claim that this has led to a rise in prices. As a result, buyers will likely have to pay an agent.
New York Times real estate reporter Debra Kamin reported on the settlement and its potential impact on the industry.
“This is a historic moment for the housing industry,” Kamin said in a recent conversation. “We'll probably look back at this moment and say that this settlement brought about a lot of change.”
In an interview, she described the NAR's far-reaching power and polarized response to change. This conversation has been edited.
Can you explain the role of the National Association of Realtors?
The National Association of Realtors is a nonprofit organization that sets the rules and regulations that have guided the housing industry for more than 100 years. Without becoming a member, it will be extremely difficult to operate as a real estate agent. For example, we own a trademark for the word “Realtor.” If you want to call yourself a real estate agent, you need to become a member, and many real estate agents say this distinction is a sign of trustworthiness. The agent also needs to list homes or find homes for sale, which requires access to listing databases, most of which are only accessible to members of her NAR .
This group also sets the rules for how agents should do business. Some of these relate to fair housing ethics and guidelines. What's notable about these recent lawsuits is that they revolve around the fundamental structure of the real estate industry: how agents are compensated for their work.
One effect of the settlement is that it will no longer be mandatory to split the typically 5 to 6 percent agent commission when selling a home.That percentage is much higher than elsewhere like in ukThe standard here is just over 1%.
The standard 5 or 6 percent commission is actually never set in stone. In repeated public statements regarding the lawsuit, NAR has said it does not set fee rates, nor has it stated that fees are non-negotiable. And technically, this is true. But in fact, the plaintiffs in the lawsuit successfully argued that the system was designed to prevent consumers from doing so. know they were able to negotiate.
Or if they wanted to negotiate, they were told by their agent that it would hurt them in the end. The reason is that you pay a commission to the agent when you sell your home. That agent then offers to split the commission with the agent representing the buyer. If you offer a low commission, the purchasing agent will be less motivated to bring potential buyers to your home.
A jury agreed with the plaintiff in a lawsuit against the National Association of Realtors. That's why commissions remain high because people want to sell their homes. By removing some rules, there is more room for competition. Agents may be willing to work for less money, resulting in lower commissions overall.
Has there ever been such a massive power check on the NAR?
NAR has held this monolithic power in the real estate industry for a century. Many, including the U.S. government, have tried to check that power. The Department of Justice began an investigation in 2005, and the investigation is ongoing. And there are a lot of startups that are trying to offer different fee models. They were not successful because NAR is very powerful. This lawsuit is surprising. Because this lawsuit involves six home sellers, and they say: We felt like we had to. ”
How will this settlement change the home buying and selling process for consumers?
There is no doubt that negotiating agent fees will be easier for many consumers. There will be more transparency around fees before both buyers and sellers agree to pay them. We understand that this is a painful moment of transition for those working in the industry. But for the average home buyer and seller, and for the U.S. housing market, this is a pivotal moment.
Many readers commented on your article about reconciliation. Some were agitated because they felt their agents had done little for them. Were you surprised by the reaction?
They weren't surprising at all. Emotions are running high around the village. After the article was published, I received a lot of notes from agents and brokers, and there was real pain behind them. They felt left alone without any guidance and were understandably angry about the settlement.
All we can do is tell the story. However, we understand that most agents who pay dues to NAR work as independent contractors and have no support or employment protections. Their livelihood is based on commissions.
