It took a Kansas City jury just three hours to find that the National Association of Realtors conspired with two of the nation's largest brokerages to keep commissions on home sales high — but it will take much longer for the verdict's ramifications to shake out.
Why it matters: U.S. homebuyers spend around $100 billion a year on broker fees — if the jury's verdict is upheld, that number will likely shrink and home prices could fall, too.
The decision puts the defendants on the hook for $1.8 billion with the possibility of treble damages, and could also shake up the business of buying and selling homes.
Real estate agents, investors and mortgage brokers are nervous about what's to come.
Catch up fast: At issue were the commissions paid to real estate agents on most home sales.
Right now sellers typically pay a fee of 5%-6% of a home's sale price; that money is split between the seller's agent and the buyer's agent.
The plaintiffs argued that NAR and its co-defendants conspired to keep those rates high and that the system prevents sellers or buyers from negotiating the fees down.
State of play: The case is likely to drag out for a while. NAR said it would appeal the verdict, and ask the judge to lower the damages awarded.
Even so, it's likely that these fees are going to start dropping now. In the lead-up to the verdict, NAR had already said a seller's fee could be as low as zero.
And brokerage firms might now start telling their agents to have conversations with clients about fees, welcoming negotiations, said Redfin CEO Glenn Kelman in a blog post.
"Rather than saying that a fee for the buyers' agent of 2% or 3% is customary or recommended, agents will say that a buyers' agent fee, if one is offered at all, is entirely up to the seller," he wrote.
The impact: That sort of thing could spur fee competition between brokers — and competition is a great way to bring prices down.
Longer-term: If the jury's verdict is upheld, the plaintiffs have also asked the judge to establish a remedy.
To take a page from Gwyneth Paltrow, that could mean that fees get consciously uncoupled — sellers pay their real estate agent and buyers pay their person. And each negotiates that fee down.
The long-term upshot from there could be home prices falling.
That's because right now the fee paid to a homebuyer's agent is baked into the home's sale price, notes Steve Brobeck, a senior fellow at the Consumer Federation of America who's long worked on this issue. If that fee goes away or is reduced, the sale price will be lower.
Yes, but: Some in the industry argue that uncoupling fees will hurt buyers, who will have to shoulder that cost upfront. NAR says lower-income buyers are most vulnerable here.
The solution, Brobeck says, is to let homebuyers include fees in their mortgages. But right now there are regulatory hurdles to that option; theoretically NAR (an immensely powerful lobbying operation) could push for that.
What's next: The lead attorney in the Kansas City case filed another lawsuit against NAR and seven more brokerages (including Redfin) right after the jury verdict came down.
Another nearly identical class-action suit against NAR is scheduled for trial next year. Meanwhile, the Department of Justice is closely watching these cases.
Emily Peck, author of Axios Markets
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