Realtor Fee Reform Blowin’ In the Wind?

The world does not pay a 6% commission on home sales, waxed the WSJ, but US suckers do. As home prices keep rising in most regions, it’s hard not to recall outrage over runaway realtor commissions during the turn of century price run up.

As the CNBC story citing Census Bureau figures, a median home value in 1990 was just $79,100 but $119,600 by 2000. Meanwhile, most realtors were still charging a 6% commission on the homes sold through their listings. And, the advent of “multiple-listing services” and “on line” shopping meant everyone had ready access to everyone else’s listings. As a result, a given realtor could be as lazy as can be yet still claim a 6% commission on a house they listed and sold in a day. Public outrage ensued, but little reform was seen in this “system.”

Fast forward to 2023 and do the numbers on a $200K vs $500K vs a $1M sales. The realtor commissions can be staggering. Not that many realtors don’t hustle, scratch & claw for their clients. Yet, regardless, from the home sellers point of view, “how much is enough?” Various media outlets have opined that the long overdue reform may be of the earthquake variety after a Kansas City federal court recently ordered the National Assn of Realtors & several real estate companies to pay $1.8 billion in damages on the grounds they conspired to artificially inflate their brokerage commissions. Of course, the defendants are appealing. But, more law suits are popping up. The WSJ frankly suggested major changes are “Blowin’ in the Wind” in “Real Estate Commissions Could Be the Next Fee on the Chopping Block?” Some “game changing” fee rules going forward, it has suggested, could include a pay by the hour component or a negotiated fixed fee NOT based on the final sales price and/or even forcing buyers to help pay the realtors (although under the current system, realtor fees are quietly “baked” into the asking price).

Davd Soul