How to lower house prices? USA: abolition of 6% commissions in real estate.

In the US, as in Portugal, real estate agents usually take a 6% commission. Or, to be more precise, they used to. An industry shake-up: commissions of 6% standard in home buying and selling transactions in the US will henceforth cease to exist. In a promising measure that should significantly reduce the cost of buying and selling a home, the National Association of Realtors [NAR, the largest association of real estate agents in the United States] announced Friday an agreement with home seller groups to end the most prominent antitrust lawsuits, paying $418 million (383 million euros) in compensation and eliminating rules on commissions.

NAR, which represents more than a million Realtors, also agreed to implement a raft of new rules. One prohibits the inclusion of agent compensation in centralized lists of local listings, known as multiple listing services [data in databases where agents list properties], which critics say forced agents to push clients toward more expensive properties. Another rule would eliminate the requirement that agents be required to register with multiple listing services - many of which are owned by NAR affiliates - where homes are widely available in the local market. Another new rule would require buyers' agents to enter into written agreements with their clients.

The agreement would effectively wipe out the current business model of buying and selling homes in the U.S., in which sellers pay both their agent and the buyer's agent, which critics say has artificially raised home prices. Some estimates call for agent commissions to drop by 25-50%, according to an analysis by TD Cowen Insights. That will open up opportunities for alternative real estate sales models that already exist but have a small market share, including fixed and discounted agent commissions.

Shares of real estate companies Zillow and Compass fell more than 13% on Friday as investors fear that lower commissions for agents could lead to fewer transactions on the real estate platforms. In last month's financial results report, Zillow warned that "if agent commissions are severely harmed, it could reduce real estate affiliate marketing budgets or reduce the number of affiliates participating in the industry, which could adversely affect our financial condition and operating results." Shares of real estate brokerage Redfin also fell nearly 5%. Meanwhile, shares of construction companies rose on the news, with Lennar shares up 2.4%, PulteGroup up 1.1% and Toll Brothers up 1.8%.

For the average U.S. homebuilder with a sales price of $417,000 [€382,000 at current exchange rates], sellers pay more than $25,000 [€23,000] to middlemen. These costs are passed on to the buyer, increasing the cost of homes in the US. According to TD Cowen Insights analysis, this commission could fall by $6,000-12,000 [€5,500-11,000]. "While the agreement comes at a significant cost to us, we believe the benefits it will bring to our industry are worth the price," Kevin Sears, president of NAR, said in a statement.

In November, a Missouri federal jury ordered NAR and two brokers to pay $1.8 billion [€1.65 million] in damages for conspiring to keep agent commissions artificially high. The antitrust violation allowed triple that amount - $5.4 billion [almost €5 billion]. NAR intended to appeal the decision, but other brokers agreed to the deal, and on Friday NAR followed suit.

"NAR has worked for years to resolve this dispute in a way that serves the best interests of our members and American consumers," NAR Acting CEO Nikia Wright said in a statement. "Preserving consumer choice and protecting our members have always been our goals. This agreement accomplishes both goals."

NAR required seller agent commissions to be included in multiple listing services. Although NAR has long argued that commissions are negotiable and that the structure helps make housing more affordable for buyers, critics have long argued that commissions were expected and sellers felt they would lose buyers if they did not offer such commissions. The agreement could reduce the cost of buying a home. Home sellers who sued NAR argued that in a competitive environment, the cost of a buyer's agent's commission should be paid by the buyer himself, not by the seller who provided the service. The sellers who opposed NAR and the brokers argued that buyers should be able to negotiate the commission with their agent and that sellers should not be required to pay it. This agreement, subject to judge approval, opens the door to more competitive real estate. Real estate agents can now compete on commission terms, allowing potential buyers to compare prices before closing a deal to buy a home. Brokers will be able to start advertising their fees, allowing clients to choose cheaper agents.

Norm Miller, a real estate professor at the University of San Diego, called it the biggest change in the real estate market in a century. "I've been waiting for this for 50 years," Miller said. While it's not clear what the future of the real estate market will be, Miller said he expects a slight increase in home purchases as costs for buyers will drop dramatically. "We may see different models in the future, and nobody knows which ones," he said, suggesting that some brokers will be able to charge, for example, a fee of three thousand dollars [€2,750] to sell a house, while others will offer a competitive commission.

The agreement will bring sweeping changes for millions of Americans, said Benjamin D. Brown, a partner in the law firm Cohen Milstein Sellers & Toll and co-chair of the antitrust practice group that helped draft the agreement. "For years, antitrust rules in the real estate industry have financially burdened millions of Americans," Brown said. NAR staff often feel powerless to negotiate for better terms because there is a risk that offering a lower commission will cause brokers to steer the buyer to other properties, said Robert Brown, a partner in Cohen Milstein's antitrust practice. "For too long, home sellers have faced a system that many believe is grossly unfair. This class action lawsuit and this settlement restores fairness for our clients and will require significant changes that will help future home sellers," Brown said.

Although most real estate agents are included in the agreement, broker HomeServices of America continues to fight the case in court, NAR said. NAR said it fought to include HomeServices of America agents in the agreement, but expressed satisfaction that more than one million of its members agreed to the deal. "Ultimately, continued litigation would have been detrimental to members and their small businesses," Wright said in a statement. "While it is impossible to achieve a completely perfect outcome, this is the best result we could have achieved in this situation."

Miller said the agreement could lead to a mass exodus of brokers from the industry - potentially half of the roughly 2 million agents in America. With lower fees, unsuccessful agents will likely leave the industry, but top brokers will get more deals. "Those who do well will undoubtedly be in a more favorable position," he said. The cost of U.S. agents is significantly higher than in other countries, Miller noted. In Israel, Singapore and the U.K., brokers charge between 1 percent and 2 percent for the same things agents do in the U.S. NAR has spent the past few years fighting all sorts of antitrust enforcement and lawsuits in the U.S. over alleged anticompetitive practices. But November's decision was a major defeat for it - and led to the elimination of rules that have long protected its payment model. It is also now under scrutiny by the U.S. Justice Department, and it is unclear whether the agreement with merchants will affect the government's investigation of the brokerage. The trade group has also experienced serious leadership turbulence in the past year. In January, former NAR President Tracy Kasper stepped down after she said she received a threat to expose her personal affairs, which had nothing to do with finance, if she didn't sacrifice her position at NAR. Sears replaced Casper earlier this year. Casper took office in August 2023 when Kenny Purcell, a former president, resigned amid sexual harassment allegations that