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Real Estate Broker Commissions Under Fire

In this clip from The Real Word podcast, Byron and Nicole discuss The Justice Department backing out of a proposed settlement with the National Association of Realtors to take a fresh look at the notoriously high commissions consumers pay real-estate agents Subscribe to The Real Word Channel → https://www.youtube.com/channel/UCTTM… Racket 1: The Justice Department backed out last week of a proposed settlement with the National Association of Realtors. What does this move mean for the housing industry?

Consumer advocates have long criticized traditional real estate commissions as confusing and too high. Now, those commissions are coming under increasing legal pressure.

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Real Estate Commission Lawsuit

The suit takes aim at the way that brokers who represent homebuyers are paid. Typically, people seeking to sell their home agree to pay a listing agent a commission — usually 5% to 6% of the sale price — to place it on a listing service maintained by local Realtor groups and to market the home. The seller agrees that the listing agent will offer to split the commission — say, a 2.5% share — with the agent representing the buyer. (Agents may share part of their commissions with their brokerages.)

The suit argues, the home seller is paying an inflated commission that is covering the buyer’s share as well. By that analysis, a seller paying a 5% commission on the sale of a $500,000 home is overpaying by about $12,500.

Consumer advocates and some analysts say the practice pushes up home prices because the commission for the buyer’s agent ends up being added to the asking price of the home so the seller can get a particular net price.

Name in the real estate lawsuit

The brokerages named in the suit are Realogy, the parent of Century 21, Coldwell Banker and others; HomeServices of America, a Berkshire Hathaway affiliate; RE/MAX; and Keller Williams. HomeServices and Keller Williams declined to comment. RE/MAX said it would “continue to vigorously defend” itself against a “baseless” suit. Realogy said in a statement that the case was “without merit.”

Source: Seattle Time

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