Real estate behemoth Anywhere, which is the parent company of Coldwell Banker among other brokerages, recently settled a class action anti-trust lawsuit for $83.5 million (https://listing3d.com/insights/real-estate-industry-faces-critical-juncture-as-lawsuits-challenge-compensation-status-quo/). At issue was the age old American real estate sales commission structure, where sellers agree to pay commission for both the sellers and buyers agents. The suit says that this inflates the costs to the sellers because when a listing agreement is signed, commission is most often split equally between both the buying and selling brokers. As a side note, Marin County brokers rarely agree to offer less than 2.5% to the buyer’s agents. Offering more commission can make a property more attractive to buyer’s agents. Offering less does the opposite. It’s human nature.
If the structure does change, and it could, where suddenly a listing agreement only covers the seller’s agents commission, that will mean the buyer’s costs will be inflated because they will need to pay for their agent’s commission. I see this as an issue that could have major repercussions for buyers. As if it isn’t hard enough to afford a house already, it could be that in the future buyers will be paying additional thousands and tens of thousands of dollars to their agents. Putting that cost on the sellers has always made closing easier for buyers.
The bottom line is that Realtors won’t work for free. Someone has got to pay the commissions, because we don’t work on salaries. With interest rates now solidly over 7%, coming off lows of under 3%, this is one of the worst times ever to pass this cost off to buyers. Everyone knows buying a home has become extremely unaffordable, and now it might become even worse.
One of the obvious answers to this issue is that if sellers become responsible for only their agent's commission, they may need to consider reducing their prices by 2.5-3% because that cost was previously built into the house prices. Mortgage brokers may need to role the buyer’s agent’s commission into their loans. Otherwise, for example, coming up with an extra $25,000-$30,000 in cash for closing on a million dollar sale is going to be extremely difficult for most buyers. Sidebar: a good agent is worth paying full commission in handling what is most often the second largest financial transaction a buyer will ever make. The largest transaction will come when they go to sell in the future. Buyers looking for discounted services are apt to get what they pay for.
Word has not filtered down to the Realtor ranks where I make my living about what changes if any are going to happen with the commission structure as a result of this settlement. I can’t imagine Anywhere paying $83.5 million and doing nothing. Change is likely coming to the American real estate commission structure. It will be disruptive and buyers aren’t going to like it. I don’t see Realtors looking forward to negotiating commissions with each and every buyer either.