The age-old question of what justifies broker fees often comes up as people embark on buying or selling their homes — and discount brokerages are egging on the conversation.
American home sellers and buyers pay among the highest fees to agents, the New York Times reported. In the U.S., the standard fee is 6 percent, with 3 percent going to the seller’s and buyer’s agents, respectively. Compare that to Asia or Europe, where standard broker fees are as low as 1 or 2 percent.
There have been a string of lawsuits over the past two years accusing the residential real estate industry of conspiring to keep broker fees high and violating U.S. antitrust laws in the process. The instigators range from private citizens to the U.S. Justice Department, with some industry members trying to offer discount models to consumers.
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As the pandemic has pushed even more of the buying and selling process online, discount brokerages with models based on online listings and transactions are keeping the subject top of mind.
Last week, Redfin announced it would publish agent commissions on thousands of public listings. It’s a move that’s in line with the spirit of the Department of Justice’s settlement agreement with the National Association of Realtors for the industry to make agent commissions more transparent to consumers and fix the industry’s misleading, incorrect advertising.
Weeks earlier, an Oregon brokerage, REX Real Estate, filed a state lawsuit challenging the state’s policy of banning brokerages and agents from refunding commissions to buyers. The brokerage is exploring filing similar suits in Louisiana, Missouri and Tennessee.
The firm says the logic behind the suit is based on the view that homebuyers are doing an increasing amount of the work to find a home without an agent’s help.
“You’re starting to see a kind of drum beat,” Mike Toth, REX’s general counsel, told the Times. “Buyers are doing so much of the work themselves. So why are commissions so high?”
The continued suits and positioning of firms like Redfin and REX indicate that pressure on the industry to reduce fees and increase industry competition is not going anywhere.
[NYT] — Erin Hudson