How can real estate agencies' business practices change?

** Industrial experts claim that the federal court decision this week against the National Association of Realtors and major brokerage firms is likely to lead to a change in the current commission model. The federal court made a decision this week, finding that the National Association of Realtors and several major brokerage companies were conspiring to keep agent commissions artificially high. Correspondents, analysts, and consumer advocates are calling this decision a game-changing development and see it as a catalyst for bringing new antitrust lawsuits against the association and brokers. Federal regulators are also seeking to get involved in the process.

Real estate market experts point to the need for changes in the current system. Currently, home sellers effectively pay a commission to both their agent and the buyer's agent, typically amounting to about5-6% and split between the two brokers. This structure is most fully realized through the National Association of Realtors, which has around1.5 million paying members. If a seller does not agree to these terms, their listing is not placed on the many multiple listing services that form the basis of most home sales. A decision this week could change the situation..

"The industry can no longer rely on the court to rule in favor of their regulated pricing system," said Steve Brobeck, a senior official at the American Consumer Federation. Experts point out a number of potential changes, including the possibility of making payment of commission fees optional so that seller agents who do not wish to pay buyer agent fees could still list their offerings in databases. Another option is for sellers to cover buyer agent commission fees as part of the final deal price. Also, if banks and federal regulators agree, housing loan rules could be changed to allow mortgage loans to directly finance buyer agent commissions. Among other possible changes are buyer agents charging a flat fee, hourly rates, or offering a wide range of services from which home buyers can choose.

Startups are trying to use different business models. Some, like CoStar's Homes.com, offer special home promotion services instead of selling buyer leads to agents, which Zillow and Realtor.com do. (Agents can pay Homes.com to promote their listings more prominently.) And companies called iBuyers, such as Opendoor and Offerpad, are trying to remain independent of multiple listing systems by placing homes they own. These companies' stocks soared after a court decision involving realtors.

** The brokerage industry may be shrinking. A reduction in commissions could lead to an80% decrease in the number of brokers in the US, according to KBW analysts. This would put small brokers or low-efficiency brokers at risk. "We will find out who are the real professionals," said Jason Haber, a Compass agent. Such a decline could have catastrophic consequences for the National Association of Realtors, which collects around $150 from each member annually. According to the organization's latest annual tax report, its net income was $79 million on revenue of $327 million. The group stated that it would appeal the court's decision.