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Shakeup Looms as Real Estate Industry Faces Commission Overhaul

Real Estate Industry Faces Commission Overhaul

The real estate landscape is on the brink of a seismic shift as a federal case in Kansas City rocks the foundations of the century-old commission structure. In a verdict that sent shockwaves through the industry, a jury found the National Association of Realtors (NAR) and major brokerages guilty of conspiring to artificially keep commissions high.

Florida Realtor Alexandr√© Worthington views this moment as an opportunity to “pick up the pieces” and prepare for impending changes. The case, brought by a group of home sellers, alleges that NAR, Keller Williams, and HomeServices of America conspired to inflate commissions, stifling competition and transparency.

Ryan Tomasello, covering real estate technology for Keefe, Bruyette & Woods, anticipates significant changes to the commission structure, with potential immediate impacts from the federal case. The judge may issue an injunction that dismantles the longstanding “bundled” commission system, where sellers’ and buyers’ agents split a 5 to 6 percent commission.

A settlement remains a possibility, with lead plaintiff attorney Michael Ketchmark engaging in discussions with the Justice Department and NAR. The verdict awarded $1.8 billion to Missouri home sellers, a figure that could balloon to $5 billion.

The reverberations of the case have already hit financial markets, with Zillow’s shares plummeting nearly 7 percent. The company, heavily reliant on advertising for buyers’ agents, sought to assure investors that its revenue model is resilient. Analysts suggest that changes could lead to a 30 percent reduction in the $100 billion U.S. consumers pay in real estate commissions.

As the real estate world braces for transformation, industry players are left contemplating the potential reshaping of their longstanding compensation model.