A game-changing real estate settlement in Detroit and beyond
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A landmark court settlement could change the way we buy and sell homes in Metro Detroit and elsewhere.
The big picture: The deal does away with realtors' standard 6% commission fee and could reduce the total amount in commissions agents receive by a third, CBS News reported, as the fee becomes something truly negotiable.
- It could disrupt the way real estate agents work — maybe driving some from the business altogether.
State of play: The National Association of Realtors will pay $418 million in damages to settle allegations it conspired to boost agents' commissions, the organization said last week, as reported by Axios' April Rubin.
- A federal court still has to approve the deal.
- Home sellers had sued the powerful Realtors association, which was found liable for keeping agent compensation artificially high.
- NAR will pay the settlement over about four years and has denied wrongdoing.
Context: As of now, the buyer's and seller's agents generally split the commission, which the seller pays. With lower commissions, and that 3% not being offered for buyers' agents, it could be pricey for homebuyers to get their own representation, James Danley, associate broker with Birmingham-based KW Domain, tells Axios.
- "Most first-time homebuyers don't have an extra 3% to hire their own buyer's agent and pay out of pocket," he says. "That's gonna leave buyers having no representation."
Between the lines: Some experts think this could drive home prices downward, per the New York Times. But Jeanette Schneider, president of RE/MAX of Southeastern Michigan, tells Axios in a statement that home prices are truly influenced by supply and demand.
- "The limited inventory of homes for sale restricts the options available to buyers, leading to more intense competition," Schneider says. "As long as this dynamic continues, we anticipate upward pressure on prices."
- RE/MAX of Southeastern Michigan is an affiliate of national RE/MAX LLC, whose own settlement on the issue is pending court approval.
What we're watching: The NAR settlement may drive away hobby agents, but "serious-minded, professional" agents will remain in the business, Schneider adds.
What's next: The settlement could go into effect as early as July, but the big changes won't happen fast.