Will real estate agents’ fees be reduced in the US? How would that affect home prices?

In September, home sales fell to their lowest level in thirteen years. Those in the real estate business are beginning to feel the impact of high-interest rates and a short supply of houses.

However, a court ruling announced last week could further impact the housing market and the way realtors and mortgage brokers do their work. A US federal jury found that the National Association of Realtors (NAR) and a select number of brokerage firms have been manipulating the market to inflate their commissions, which helped to push housing prices even further. The class action suit challenges the notion of brokerage fees, which lawyers for the plaintiffs say are hidden from buyers. In most cases in the US, when a house is listed, a fee is included in the cost for the seller that is paid to the agent representing the buyer. Speaking with Yahoo Finance, Axios reporter Emily Peck said that “the fee is usually around five or six percent. The buyer pays that fee, and the buyer’s agent and the seller’s agent split it.” The legal team is arguing that this setup creates an incentive to push housing prices up, and because the fees are an industry standard, consumers aren’t left with any other option but to pay.

NAR found liable for conspiring to increase commissions

The verdict is already creating ripples throughout the industry, which the CEO of the National Association of Realtors, Bob Goldberg, resigned. NAR was named in the suit and accused of organizing the conspiracy. Goldberg had planned to retire this year, but this pricing scandal and those related to sexual misconduct forced him to vacate his leadership role early.

The lawsuit was brought against NAR and a group of brokerage firms with whom the organization conspired to increase commissions. These misdeeds led a jury to find those in the suit liable to pay $1.78 billion in damages. NAR has challenged the ruling, releasing a statement that they would “appeal the liability finding because we stand by the fact that NAR rules serve the best interests of consumers, support market-driven pricing, and advance business competition.”

Some of the real estate companies accused of this practice have already settled with their customers. Although the companies, such as Re/Max, Anywhere Real Estate (Century 21, Coldwell Banker, and Corcoran), did not admit liability, they collectively paid out over $120 million.

How could the case impact prices for homebuyers?

The court could intervene to prohibit this practice, which could decrease the burden on sellers. To date, no decision on this front has been released by the court. The fact that NAR and its conspirators could have to pay out nearly $2 billion to customers could force the organizations to rethink their business practices. However, with NAR maintaining its innocence, it is unlikely that any changes to the practices of the organization will be made.