It’s not just home prices and mortgage rates that have made housing unaffordable. Realtors and residential brokerages have conspired to keep commissions for home sales artificially elevated, according to a federal jury in an antitrust lawsuit.

On Oct. 31, the National Association of Realtors (NAR), HomeServices of America, and Keller Williams were found guilty of colluding to inflate commissions on home sales.

They were ordered to pay nearly $1.8 billion in damages to home sellers across the Midwest.

The class action lawsuit claimed that the NAR and corporate brokerages knowingly violated antitrust rules, which allowed them to maintain high commission rates.

Specifically, the lawsuit targeted the NAR’s policy requiring brokers to offer buyers’ agents compensation after selling a home.

Listing brokers and real estate agents are supposed to share commissions, but the plaintiffs successfully argued that this was merely a ploy to charge home sellers higher fees for services that may or may not have been used.

Sellers complained that broker compensation was too high despite their diminishing role in facilitating home sales.

“NAR and corporate real estate companies have had a stranglehold on real estate commissions for too long,” plaintiffs’ lawyer Michael Ketchmark said, as reported by The Wall Street Journal.

The jury reached a verdict after just two weeks of testimony.

A “wake-up call”

Sissy Lappin, owner of a Houston-based real estate brokerage, called the verdict a “wake-up call for real estate agents” who’ve gotten used to hefty 5-6% commissions on home sales.

Moving forward, they’ll have to work harder to convince sellers and buyers to hire them.

Matt VanFossen, the vice president of Community Home Lenders of America, said the lawsuit made sense for the consumer.

“I think the core of the case, what’s being looked at here, is a seller should not be obligated to pay the buyer agent commission. There should be no obligation,” he said in an interview with MPA Mag.

After all, why would a seller pay an agent whose job is to negotiate for the buyer and against their best interest?

Phillip Cantrell, the CEO of Benchmark Realty in Tennessee, threw the NAR under the bus and said the trade group should get out of the multiple listing service (MLS) industry entirely.

“Since over 90% of the MLSs in this country are owned or controlled by NAR, the most effective thing the organization can do is get out of the business they have so grossly mismanaged, thereby reducing some of this intense scrutiny,” he said in an op-ed for HousingWire.

Lowering costs for buyers and sellers

Although reducing the commission fee by a few percentage points doesn't seem like much, every penny counts in a housing market where costs have spiraled out of control.

According to the St. Louis Fed, the median sales price of a U.S. home was $431,000 in the third quarter of 2023. Average prices were below $330,000 just before the pandemic.

When you crunch the numbers, the typical 6% commission on a $431,000 home is $25,860. A 3% commission, for example, is only half that—$12,930.

Most home buyers could do a lot of good things with that extra money in their pockets. Especially with 30-year fixed mortgage rates nearing 8%.

Commissions may not change the calculus of whether to buy or sell, but they can certainly influence consumers’ decision-making. The new ruling is expected to give them more latitude in negotiating more competitive rates.

“Sellers are overcharged, buyers are unable to negotiate commissions, and as a result home costs are higher," Stephen Brobeck, a senior fellow at the Consumer Federation of America, said of the previous regime.

“The recent verdict is a “great victory for consumers,” he said.