• Sun. Dec 3rd, 2023

    The Changing Landscape of Real Estate Commissions

    ByNuala Hafner

    Nov 20, 2023
    The Changing Landscape of Real Estate Commissions

    Real estate commissions have long been a contentious topic, sparking a nationwide debate about agent compensation and who should bear the burden of payment. Recent legal cases, including a federal jury finding in late October, have put major real estate brokerages and the National Association of Realtors (NAR) under scrutiny for potentially inflating agent commissions. However, these cases are just the tip of the iceberg and could have far-reaching implications for the homebuying process.

    Multiple court cases are currently in progress, with one being a class-action lawsuit that has the potential to result in billions of dollars for plaintiffs. If successful, this lawsuit could fundamentally disrupt longstanding industry practices, according to The Associated Press. Rather than buyers being responsible for paying buyer agents’ commissions, the sale prices of homes often include these commissions, leading to inflated prices. The possible elimination of this practice would pave the way for buyers to negotiate lower commissions and pay less overall.

    While the impact of these legal battles may initially be limited to specific regions, such as Maryland where buyer agency agreements are more prevalent, the consequences could extend nationwide. Cash-strapped first-time buyers, who already face the challenge of saving for their first home purchase, may find themselves needing even more funds due to changes in regulations. The question arises whether lenders may adapt their rules to accommodate rolling the buyer agent fee into the mortgage.

    These legal developments may also have ramifications for new agents entering the real estate industry. Articulating the value they bring to buyers will become crucial in order to justify their commissions. Experienced agents, on the other hand, may be better equipped to navigate these changes.

    The class-action lawsuit that triggered this debate was filed in 2019 on behalf of approximately 500,000 home sellers in Missouri and its surrounding areas. The jury found that the NAR and co-defendants violated federal antitrust laws by compelling home sellers to pay brokers representing buyers. Additionally, the Department of Justice filed a complaint in 2020, alleging that NAR’s policies restrained competitors illegally. While a settlement was initially offered by the Department of Justice, it was later withdrawn in 2021 to allow for a more comprehensive investigation into association rules and conduct.

    As the real estate industry grapples with these legal battles, it is clear that the landscape of commissions is undergoing significant changes. The outcome of these cases could shape the future of agent compensation and influence the affordability of homes for buyers across the nation.


    Q: What sparked the nationwide legal debate about real estate commissions?
    A: The debate was sparked by allegations of artificially inflated real estate agent commissions and the question of who should bear the responsibility of paying them.

    Q: What potential impact could these legal cases have on the homebuying process?
    A: If successful, the cases could lead to a renegotiation of agent commissions, resulting in lower payments and more negotiating power for buyers.

    Q: How might the changes in regulations affect first-time buyers?
    A: First-time buyers may face the challenge of saving even more money upfront due to potential changes in regulations governing real estate purchases.

    Q: Could lenders adapt their rules to address the buyer agent fee issue?
    A: It remains unclear whether lenders will modify their regulations to allow for including the buyer agent fee in the mortgage.

    Q: How might these legal changes affect new agents entering the real estate industry?
    A: New agents may face challenges in justifying their value and commissions to buyers, whereas experienced agents may be better equipped to navigate the changing landscape.