There’s an important sea change that’s taken place in America’s $136 trillion real estate market. It stands to impact nearly everyone buying or selling a home.
It’s all due to a game-changing lawsuit homeowners filed against the National Association of Realtors, challenging how real estate agents get paid. As a result, Realtors now face new rules designed for consumer benefit. But the overhauled system and the fallout are still being sorted out.
Jerod Breit helped spark this real estate revolution. He joined a class action lawsuit challenging the longstanding structure of the entire U.S. real estate system.
“When I sold my home in St. Louis, which was a huge part of this case, I just remember saying, ‘Why am I paying someone who I’ve never met before 3%?’ No one from the buyer’s side ever did anything for me,” he said.
Historically, people selling their home typically paid about 3% of the sales price to their Realtor, and another 3% to the buyer’s agent.
“I was confused,” Breit said. “It was the first time I sold a home, and I really wondered, where’s the fairness in paying 3% and 3%?”
He continued, “People haven’t been happy about that. It’s one of those things where it’s painful, but you have to do it. That’s the way it is. That’s the way it’s always been done.”
The lawsuit claimed that sellers having to pay the buyer’s Realtor led to cozy deals between the supposedly competing agents, prioritizing their own shared profits over clients. The lawsuit also took on murky contracts and hidden fees.
The National Association of Realtors — and major companies that agents work under — were found guilty of antitrust violations and settled for half a billion dollars. After the Department of Justice weighed in, the Realtors’ group agreed to overhaul its rules, making agents’ pay more competitive. They must now usually disclose compensation upfront in writing, clearly stating it’s negotiable.
After the landmark lawsuit, Arizona has emerged as a test market for innovative commission models, such as hourly rates for agents or flat-fee services.
“The DOJ just felt that we needed to be, everything needed to be above board, which it always has been,” said Sindy Ready, who heads up the Arizona Association of Realtors. “And they’ve said that, you know, the commissions were set and not negotiable. And I’ve been doing this for 23 years, and they’ve always been negotiable.”
But Breit says that’s not true.
“It’s one of those things where it might have been kind of this sense of, ‘We are okay if we say, you know, ‘It was always negotiable.’ But I think 99% of homeowners out there, roughly, have never had the opportunity to negotiate that,” he said.
The National Association of Realtors declined our interview request. But according to one analysis, since the lawsuit settled late last year, average total Realtor commissions have dropped from 5.64% to 4.96%, saving consumers nearly $3,000 on a typical home.
Ready says it’s important to hire an agent that “really understands the market that they’re buying and selling in.”
“Because that’s where the benefit comes in of having a professional help you with the process and also help you with the confusion of what’s happening,” she said.
Before the lawsuit, U.S. real estate fees tended to run a total of 5% to 6% of the price of a house. That’s significantly higher than the 1% to 3% in other countries.
“Full Measure with Sharyl Attkisson” airs at 10 a.m. Sunday, WJLA (Channel 7) and WBFF (Channel 45).
