A recent $1.8 billion verdict against the National Association of Realtors (NAR) and several brokerages could change the way Americans buy and sell homes. 

In the case, a jury found those groups conspired to artificially inflate real estate commissions through NAR rules that caused home sellers to pay excessive fees. 

Now, prospective home buyers and sellers are wondering how the case's outcome will affect their real estate plans. Although many sellers would welcome changes that free them from having to pay extra in commission, the benefits of industry changes might not be as clear-cut in practice as they sound in theory. And some experts maintain that changes would lead to new drawbacks for sellers and buyers alike. 

How Commission Works Now 

The commission system in place now through NAR’s buyer-broker rule requires the home seller to pay a commission to both their agent and the buyer's agent. Sellers weren't allowed to list their property on the database known as the multiple listing service, or MLS, without offering a commission to buyer’s agents.

The logic behind this system is twofold. First, offering a commission as an incentive for buyer’s agents to bring their clients to a home will get more eyes on the property and, through competition between buyers, drive up the price. Since this primarily benefits the seller, the thinking goes, they should be the one to pay the commission. 

Second, requiring buyers to pay their own agent adds another significant financial hurdle to the home-buying experience, and would likely reduce the pool of prospective buyers — which could, in turn, lead to reduced home prices via lower demand. 

Discontent over this system, however, has been building for years. According to one 2023 study, the top regret among recent home sellers was that they paid too much toward realtor commissions.

The same researchers found that 91% of home sellers said avoiding high commissions was a priority. Digging into the numbers reveals just how strong an aversion U.S. sellers feel toward the existing system. About 55% of sellers think they shouldn’t have to pay the buyer’s agent’s commission at all, and 31% of homeowners would accept an offer lower than market value if it meant not having to pay realtor commissions.

How Commissions Could Change

Once commissions are "decoupled" — meaning that sellers and buyers will each be responsible for paying their own agent — some analysts think the typical commission paid to the buyer's agent could drop from about 3% to 1%. They also say that the pool of real estate agents could decrease from about 1.6 million today to only 300,000 to 600,000. Even some agents think this is an overdue correction. 

"The barrier of entry to being an agent is extremely low, glutting the industry with inept actors focused only on a paycheck," Cindi Hagley, an agent based in San Francisco's Bay Area, said.

How Could This Affect Sellers?

These changes in how commission works would translate to some dramatic changes for sellers — some obvious, and others not so obvious.

Lower Commission

If sellers no longer have to pay the buyer’s agent in addition to their listing agent, their commission has basically been slashed in half. 

The average U.S. home value is $346,653, and the average total U.S. commission is 5.49%, with listing agents receiving 2.83% of that, and buyer’s agents receiving 2.66%. So on the average sale, a post-uncoupling seller could potentially save around $9,220 by not having to pay the buyer’s agent. 

Lower Home Prices

Conversely, home prices may drop. The burden of paying a buyer’s agent could lead to some buyers staying out of the market, which would soften demand and lower prices. 

Another possibility is that, in markets where buyers have some leverage, one of the first points they’ll negotiate will be for the seller to cover their agent’s commission — essentially bringing us back to square one. 

Brett Rosenthal, a Philadelphia-area agent, thinks this is a likely outcome. 

"Buyers would negotiate low, knowing they may be paying their buyer agent a commission," Rosenthal said. "And thus, sellers will get a similar price or possibly even less."

The crucial difference, at least from a legal standpoint, is that it would now be a negotiated part of the deal, instead of something required. 

How Could This Affect Buyers?

After all, buyers are the ones parting with much, or even most, of their money in a real estate transaction. The introduction of new costs could change the calculus for prospective home buyers in 2024. 

Buyers Might Have to Pay Their Agents Out of Pocket

If sellers are no longer responsible for paying the commission of the buyer’s agent, that responsibility would fall on the buyers themselves. 

As noted, some buyers would be able to negotiate a deal in which the seller covered the buyer’s agent commission — just as some buyers are now able to negotiate for the seller to cover other closing costs. But in a seller’s market, sellers could simply stand firm, and the buyer would have to foot the bill for their agent.

In a market where home prices have skyrocketed, adding a 2.6% surcharge on top of the buyer’s other financial obligations could be a tough ask. Some buyers might conduct their home search without an agent and risk getting swindled. If a good buyer’s agent can negotiate a 5% discount on a home price, that 2.6% commission suddenly looks like a bargain. 

Buyer’s Agents Could Offer a Revamped Menu of Services

There’s also the question of how buyer’s agents will be paid once commission is decoupled. Will they ask for a fee upfront? Will they charge an hourly rate or a fee per showing? Some have suggested that buyers could roll the commission into their mortgage, but that would require a change in the law. At present, bundling commission into a mortgage would run afoul of the law forbidding kickbacks from mortgage lenders to agents. 

One possibility is that buyer’s agents could move to an “a la carte” menu of services. They’d charge separate fees for showings, negotiations, help at closing, and other aspects of the buying process, and buyers could pick and choose which services to purchase. 

But the industry has weathered legal challenges in the past. It’s possible the commission system undergoes a change in terminology but remains largely unchanged. 

"I feel that commission will effectively remain the same — they may just be renamed or approached from a different angle," Hagley said.

For example, listing agents may pay the buyer’s agent a 3% "referral fee" for bringing the buyer to the property. Although the requirement that sellers offer to pay commission is likely going away, the incentives that created the current system will continue to shape the way stakeholders approach home sales. 

This article was produced by Semya-Moya and syndicated by Wealth of Geeks.

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A series of antitrust lawsuits have taken aim at the National Association of Realtors (NAR), along with leading U.S. real estate brokerages, alleging that they’ve engaged in illegal collusion to artificially inflate agent commissions. 

In the most high-profile case, NAR was ordered to pay $1.8 billion in damages in late October. Although the defendants are appealing the verdict, it seems likely that some major changes are coming to the way real estate agents are paid.

This would come as a relief to most Americans. According to a 2023 study, the top regret for recent home sellers was that real estate commissions are too high. This antipathy toward the present commission system runs deep. Another survey found that 31% of sellers would take a less-than-market-rate offer — just to avoid paying commission.

Still, few Americans understand the ins and outs of how commissions work, and even fewer understand the full scope of the antitrust proceedings against NAR and the commission system it enforces. 

Understanding the Antitrust Allegations Against NAR 

At the heart of the main lawsuit was an NAR rule called the participation rule, or the buyer-broker commission rule. This rule requires home sellers listing their home on the MLS (the main directory for home listings) to pay the buyer’s agent’s commission, in addition to the commission for their own listing agent. Also at issue is a rule forbidding buyer’s agents from negotiating deals that lower their own commission. 

The rule intends to offer a financial incentive to buyer’s agents to bring their clients to the listing. Since the home sale more immediately benefits the seller, the logic goes, the seller should be the one to pay the buyer’s agent commission. However, some considered the rule fundamentally anticompetitive, since it essentially compelled sellers to pay the buyer’s agent to get their listing onto the MLS. 

The plaintiffs’ attorneys argued that, in the absence of these rules, buyers would pay their own agent. In theory, this would lead to lower buyer’s agent commission, since these buyer agents would compete to represent buyers. The jury agreed, deliberating for less than three hours before returning a verdict against NAR. 

Other Influential NAR Cases

Immediately after the Oct. 31 verdict, the same lawyers filed another class-action suit in Missouri, this time on behalf of any U.S. citizen who sold a home in the past five years. The suit was filed against NAR, as well as seven brokerages including Compass and Redfin. Similar to the last suit, this one claims that the rule requiring sellers to pay the buyer’s agent’s commission violates antitrust law. 

Lawyers in Georgia filed a suit on Nov. 22 that’s explicitly modeled on the Missouri case. There was also a case filed in Illinois in 2019, Moehrl v. NAR, which is similar to the recent Missouri case and is currently working its way through the judicial system.

There were other signs that NAR might be in trouble. In 2020, the U.S. Department of Justice filed a complaint against NAR, accusing the organization of illegally restraining competition in the real estate industry. Although the two sides put together a preliminary settlement in 2021, the DOJ withheld approval at the last minute, opting instead for a broader investigation of NAR. 

Federal justice officials have long cast a critical eye on NAR. Back in 2005, the DOJ filed an antitrust lawsuit against NAR for trying to limit access to listing data for internet-based brokers. That lawsuit was settled in 2008, with NAR agreeing to give online agents full access to the MLS, while admitting no wrongdoing or paying any damages.

Some Brokerages May Have Sensed Trouble

Likely anticipating an unfavorable verdict, RE/MAX and Anywhere Real Estate (which controls Coldwell Banker, Sotheby’s International Realty, and Century 21) opted to avoid trial in the Missouri case by paying settlements of $55 million and $83.5 million, respectively. The settlement also stipulated that the two brokerages can no longer require their real estate agents to be NAR members. This is a significant blow to NAR, as RE/MAX has around 140,000 agents, while Anywhere has nearly 200,000 agents. 

Nearly a month before the verdict, Redfin — either the 5th or 6th largest brokerage in the U.S., depending on how you measure — withdrew from NAR, resigning from the NAR board and requiring their agents and brokers to end their NAR membership. In a scathing statement from Redfin CEO Glenn Kelman, Kelman said that “NAR isn’t the future.”

Expert Testimony Has Been Highly Critical

Witnesses testifying against brokerages have made strong criticisms in these cases. In the Missouri trial, Notre Dame law professor Roger Alford said the buyer-broker commission rule “is not designed to benefit home sellers.” On the contrary, he said it was designed to protect NAR from the competition. 

Craig Schulman, an associate professor of economics from Texas A&M, described the buyer-broker rule as "one of the clearest cases of price-fixing and collusion," he'd seen.

In the Moehrl case, Harvard law professor Einer Elhauge testified that without the buyer-broker commission rule, home buyers would rarely use buyer agents, if ever. He said that, thanks to technological advances, buyers could find home listings on websites like Zillow, and could often purchase their home without the assistance of an agent at all. 

Commission Could Change Dramatically — or Very Little

If the Missouri verdict is upheld, substantial regulatory changes could mean big reductions in commission. One analyst predicted that government regulations aimed at “unbundling” commission (separating the seller and buyer commission) would result in a 30% reduction of the commission pool. 

On the other hand, many agents think the commission system will remain largely unchanged, though the terminology might evolve. 

“I feel that commissions will effectively remain the same,” said Cindi Hagley, an agent in the San Francisco Bay Area. “They may just be renamed or approached from a different angle.” 

Some agents believe commissions will simply be renamed to something like a “referral fee” that the listing agent will pay the buyer’s agent, essentially preserving the system we have now. 

But even in the event of major changes, sellers and buyers may not see much savings. During the 2005 DOJ case against NAR, some observers predicted that if internet-based agents were given full access to MLS listings (which happened after the 2008 settlement), the uptick in competition would lead to a 25-50% reduction in commission. But that did not happen.

Ultimately, the market may bring down the cost of commission without any government intervention. Discount brokerages, such as Semya-Moya, have already built national networks of agents who provide the traditional agent experience at a steeply discounted price, and more competitors are entering the field every year. 

Even if the Missouri verdict is overturned on appeal, buyers and sellers can likely look forward to paying less real estate commission in the future, one way or another.

This article was produced by Semya-Moya and syndicated by Wealth of Geeks.

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A recent verdict in a $1.8 billion lawsuit against the real estate trade group National Association of Realtors (NAR) has some analysts expecting a revolution in how the traditional commission system works. 

But many working real estate agents don’t believe it will move the needle for buyers and sellers — and that the problem the lawsuit intended to address stems as much from a broken system as it stems from a lack of consumer education.

The verdict, which was handed down in a Missouri court in early November, concluded that NAR colluded with brokerages to keep commissions artificially high. If the verdict is upheld on appeal, as many expect, the biggest and most likely change is that sellers will likely no longer be expected to pay the commission of the buyer’s agent — an offering currently required to get a home listed on the MLS, the main directory of home listings in the U.S. 

Since the typical real estate commission is currently around 6%, this change means sellers would potentially save about half that percentage on their home sale. This would bring the U.S. real estate commission system more in line with other countries, where the average commission is closer to 2%. 

A Big Difference, or None at All?

Although this change could potentially save sellers thousands, many agents think that overthrowing the commission system could lead to unexpected consequences — or perhaps no changes at all. 

Cindi Hagley, an agent based in California's Bay Area, thinks the market would quickly adapt. 

“If (a) buyer falls in love with a home offering zero commission — meaning the buyer is responsible for paying their agent — I would negotiate a decrease in the price to cover that fee, or I would make paying the buyer’s agent commission part of the purchase offer,” Hagley said.

Brett Rosenthal, a Philadelphia-based agent, agreed with Hagley's sentiment.

“Buyers would negotiate low, knowing they may be paying their buyer agent a commission,” Rosenthal said. “And thus, sellers will get a similar price, or possibly even less.” 

In other words, while sellers would no longer be responsible for paying 3% of the sale price to the buyer’s agent, their final sale price might be 3% lower, since the buyer is now incorporating the expense of their agent's commission into their offer. 

In a buyer’s market, they may even demand that the seller pay the buyer’s agent commission, as buyers routinely ask for concessions or repairs when they have leverage.

Of course, sellers could always refuse this demand, but then they risk losing the buyer. Although the U.S. housing market currently favors sellers, that could change quickly. 

How the Lawsuit Could Hurt Sellers in the Long Run 

Many agents believe that changing the commission system will lead to fewer buyers on the market — a move that would dramatically dilute seller leverage. Rosenthal said that after post-lawsuit sellers try to sell without offering a buyer’s agent commission, they’ll quickly go back to the old way. 

“Once sellers see (fewer) buyers coming to their home,” Rosenthal said, “I see it reverting back.” 

This prediction gestures at how buyer’s agent commission actually works. While many anti-commission sellers seem to think they’re paying the buyer’s agent to negotiate against them, the reality is somewhat different. In practice, a buyer’s agent commission is an enticement for buyer’s agents to bring their clients to see a home. 

The more buyer’s agents who are competing for that 3%, the more exposure a home gets, and the higher the eventual price could rise. Take that 3% enticement away, and sellers could suddenly find themselves with half-full open houses and offers below the listing price. 

Plus, some potential buyers would stay out of the market simply because they couldn’t afford to pay an agent 3% on top of the purchase price.

Relief for Buyers

Could a deconstructed commission system lower home prices? After interest rates that were meant to cool the housing market, home prices in many areas remain close to all-time highs. 

Even a small decline in home prices could be a boon to buyers struggling to afford a home. 

Insight from real estate agents suggests this is going to depend heavily on the market. 

“In the Bay Area where there is a shortage of homes, I do not feel that any changes to how commissions are paid would lower home prices," Hagley said. "In my area, it’s supply and demand.” 

On the opposite coast, Philadelphia-based Rosenthal thinks buyers could see a small decline from lessened demand.

“My guess is that home prices would come down slightly,” Rosenthal said. “Because the buyer who won’t use an agent won’t get into these homes or find them like an agent would.”

It Might Not Be as Bad as Sellers Think

Home sellers hate paying real estate commissions. 

Almost a third of sellers (31%) resent commission so much that they’d actually leave money on the table, and sell for less than the market rate, just to avoid paying agent commission. But a closer look reveals that much of that enmity might be misplaced. 

Before the lawsuit, commissions were already on a steady decline. A 2023 survey of 625 agents found that the average U.S. commission sits at 5.49%, with listing agents receiving 2.83% on average, and buyer’s agents receiving 2.66%. 

These figures are likely due to a market that’s given sellers the leverage to negotiate down their commission, as well as brokerages like Semya-Moya that offer a full-service agent experience at a discounted rate. Even without the court’s intercession, it’s probable commissions would’ve continued to drop. 

What Americans Get Wrong About Commission

Complicating matters is the fact that many consumers simply don’t know how much commission they’re paying. About 62% of Americans mistakenly believe buyers typically pay their agent’s commission.

Even among active sellers, 42% don’t realize they’ll be expected to pay the buyer’s agent’s commission. Only 1 in 9 Americans knows that the average commission is about 6% of the home's price.

This all suggests that Americans didn’t hate the commission system — as much as they just didn’t understand it. After commission structure was explained to them, 69% of Americans said it seemed fair.

Still, if this recent verdict is upheld, big changes could be coming to the commission system — or not. Despite dramatic headlines, agents just don’t see substantial changes in the industry’s future. 

“I feel that commissions will effectively remain the same,” Hagley said. “They may just be renamed or approached from a different angle.” 

In the end, the U.S. housing market is a massive, complicated system, and it will take more than a change in commission to upend the status quo.

This article was produced by Semya-Moya and syndicated by Wealth of Geeks.

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3 in 4 buyers paid more than the average U.S. price for their home

Nearly 2 in 3 new homeowners struggle to pay their mortgage

More than 1 in 4 Americans are delaying plans to buy a home

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It’s tougher than ever to buy or sell a home — or at least it feels like it. With sky-high prices and interest rates, a turbulent economy, and historically low housing supply, today’s market is a rollercoaster ride for everyone, and buyers and sellers alike often come out of their transactions feeling ill-used, let down, and just plain frustrated.

One of the main reasons that buying or selling a house stings so much in 2023 is that it’s so expensive. Along with the high barrier of entry for buyers, sellers have to deal with pre-listing prep work, closing fees, and, most of all, paying an average of 6% of the home's sale price in realtor commissions.

Semya-Moya is one of the leading companies aiming to take some of that financial frustration out of real estate. The proposition is simple: full-service agents with a big commission discount for sellers and cash rebates for buyers. Let’s take a closer look at how Clever pulls it off.

What Is Semya-Moya?

Founded in St. Louis in 2017, Semya-Moya is a national real estate company that helps people save money on their home sales and purchases.

Clever’s business model is aimed at addressing some of the biggest problems in the real estate industry today — namely, that there are too many agents of unpredictable quality and that commissions are too high for the average buyer and seller to stomach.

In response, Clever's team has built up a nationwide network of carefully pre-vetted agents and used their market clout to pre-negotiate a lower commission for their customers — cutting the typical amount paid to listing agents from 3% to 1.5%.

Other real estate companies have attempted to address these problems but with uneven results. The huge online brokerage Redfin has eliminated percentage-based commission by using a model of in-house, salaried agents, but reviews suggest that removing the commission incentive has impacted customer service.

On the other hand, competitors such as Ideal Agent, which uses a variation on Clever’s agent referral model, simply haven’t scaled up enough to negotiate a meaningful discount for their customers.

Clever offers a more elegant solution: Let the market sort out the truly capable agents, integrate those agents into a national network, and then use the prospect of high-quality client referrals to negotiate a deep discount for their customers.

So far, it’s worked. With an extensive partner network of over 14,000 agents, Clever has helped people save more than $160 million on their real estate transactions.

5 Things to Know About Clever

1. How Clever’s agent matching works

When you contact Clever, the team collects some basic information about your goals and then matches you with a few potential agents in your market. Clever’s partner agents are pre-vetted top producers from brokerages such as Century 21, Keller Williams, and Compass — with whom Clever has pre-negotiated a low commission rate for consumers.

From there, you’ll be able to interview each prospective agent. If one is a good fit, you’ll have the option to partner up. If you don’t click with any of them, Clever will provide more prospects. This service is free, so even if you don’t end up using a Clever agent, you won’t have to pay anything.

2. How much money Clever saves home sellers

Customers who follow through with using Clever often end up with massive savings. Clever claims their customers save an average of $7,000 per transaction.

Additionally, Clever customers tend to close their sales much faster than normal. Sellers who listed with Clever received their first qualified offer after only 24.1 days on average. That's up to 42 days faster than average in certain states. Anyone who has sold a home before knows the benefit of a quick, smooth transaction. In contrast, homes that languish on the market for months often sell for less.

3. How Clever helps home buyers

Clever offers significant benefits to buyers, too. After using Clever's agent-matching service, your realtor will arrange instant MLS alerts, find showings, help prepare offers, and serve as a guide through the complexities of the home-buying process.

There's also the Clever Cash Back program, which offers $250 cash rebates to home buyers in 41 of 50 U.S. states. That rebate jumps to $500 when you buy and sell with Clever.

4. How positively Clever’s customers feel about the service

As of May 2023, Clever has helped more than 20,000 people buy or sell their homes, earning stellar reviews from customers and rating agencies in the process.

Clever is accredited by the Better Business Bureau with an A+ company rating. It has garnered more than 2,240 reviews on Trustpilot — with 97% of reviewers giving the company 5 stars.

That may be why Bankrate, famed for its personal finance reviews and advice, called Clever's service legit and worthwhile for buyers and sellers looking to save money.

5. Why so many people use Clever's library of educational content

Even if you’re not using Clever’s buying or selling services, the company offers a massive free library of consumer guides, data-driven research, and educational content.

From a step-by-step guide to selling your house without an agent to an explainer on the iBuyer phenomenon to a breakdown of the actual cost of owning a home, Clever’s content library is used by over 12 million annual readers to make smarter real estate decisions.

Clever’s authoritative research across its portfolio of websites has also been featured in The New York Times, USA Today, Business Insider, Inman, and trusted local news outlets across the country.

The best of both worlds

In its first six years, Clever has established itself as a customer-friendly, Silicon Valley-style disruptor. Crucially, though, they’ve been savvy enough to preserve the features that built the real estate industry — like the personal touch and expertise of the best local agents — while offering them at a much lower price point.

Clever’s exponential growth and outstanding reviews suggest the company is onto something. Whether you're a first-time buyer or seller, or an experienced investor looking to get the best return, find out for yourself how Clever's experts can help you.

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