You may or may not be aware of a class-action lawsuit filed in Chicago that could change the way real estate agents are paid commissions. The suit was filed back in March on behalf of anyone that sold a home in the last five years through some of the biggest listing services in the country.
Included in the “real-estate agent broker commissions antitrust” lawsuit are the National Association of Realtors, Realogy Holdings Corp., Home Services of America Inc., RE/MAX Holdings Inc. and Keller Williams Realty Inc. What is really surprising is the limited amount of discussion taking place in the realtor community.
This kind of shake-up has some similarities to what happened in the mortgage space when the Secure and Fair Enforcement for Mortgage Licensing Act of 2008 (SAFE Act), was passed on July 30, 2008. With a number of bad actors in the mortgage space handing out sub-prime loans back then, the law helped “enhance consumer protection and reduce fraud through the setting of minimum standards for the licensing and registration of state-licensed mortgage loan originators.”
Fast forward to today, and this new lawsuit that targets real estate agent commissions could result in similar types of regulation that would change how commissions are paid.
The lawsuit is open to sellers in more than 20 service areas across the US and two other claims were filed back in April. Though we are likely quite some time away from any decision, should the courts side with the lawsuit plaintiffs, the real estate industry will change drastically.
This is not all what it seems. Companies like Zillow, Open Door, and other services that offer to buy homes directly from the seller charge as much or more than a traditional transaction using a realtor. While on the surface this lawsuit looks to protect consumers, these companies are waiting on the sidelines with the hope that this does impact today’s way of doing business. These “I buyer” type programs do not charge traditional commissions, and as such this lawsuit not affect their cost structure.
The reality is that most real estate agents do what is right for everyone involved. Like any industry there will always be bad actors. Being an informed consumer is very important along with choosing a real estate agent that comes with a high reputation is truly the answer.
Regulation in the mortgage industry cost consumers more fees in the long run as banks had to compensate for the new rules. The same could happen in real estate as these large “I buyer” platforms will have the ability to charge fees to the consumer without being held to same rules as tradition real estate.
If you’re not completely familiar with the issue, here are some articles to get you up to speed: